蝌蚪网 Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Optimal Contract Regulation in Selection Markets
蝌蚪网 Journal: Microeconomics
vol. 17,
no. 2, May 2025
(pp. 94–126)
Abstract
We model competitive insurance markets with continuous cost-types. A regulator sets minimum and maximum coverage levels and a fee for nonbuyers. Equilibrium is unique if the type distribution is log-concave. Increasing the nonpurchase fee increases welfare if the density of types is decreasing. The optimal level of the minimum coverage is positive, below full insurance, and induces some pooling at the minimum coverage contract. The optimal level of the maximum coverage is full insurance, even in an extension that allows for ex post moral hazard.Citation
Levy, Yehuda John, and Andr茅 Veiga. 2025. "Optimal Contract Regulation in Selection Markets." 蝌蚪网 Journal: Microeconomics 17 (2): 94–126. DOI: 10.1257/mic.20230164Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
- G22 Insurance; Insurance Companies; Actuarial Studies
- G28 Financial Institutions and Services: Government Policy and Regulation