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Fred Schroyen, Norwegian School of Economics Print
Tuesday, 23 April 2013, 14:00 - 15:15

 Fred Schroyen, Norwegian School of Economics

Multidimensional screening in a monopolistic insurance market

Abstract: We consider a population of individuals who differ in two dimensions, their risk type (expected loss) and their risk aversion, and solve for the profit maximizing menu of contracts that a monopolistic insurer puts out on the market.  Our findings are threefold.  First, it is never optimal to fully separate all the types.  Second, if heterogeneity in risk aversion is sufficiently high, then some high-risk individuals (the risk tolerant ones) will obtain lower coverage than some low-risk individuals (the risk averse ones).  Third, when women tend to be more risk averse than men (in that the risk aversion distribution for women first order stochastically dominates that for men), gender discrimination may lead to a Pareto improvement.


Location: R42.2.113
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