期刊名称：Discussion Papers / Business School, University of Strathclyde
出版年度：2009
卷号：2009
出版社：University of Strathclyde
摘要：There is a general presumption that competition is a good thing. In this paper we
show that competition in the insurance markets can be bad and that adverse selection is
in general worse under competition than under monopoly. The reason is that monopoly
can exploit its market power to relax incentive constraints by cross-subsidization between
di
erent risk types. Cream-skimming behavior, on the contrary, prevents competitive rms
from using implicit transfers. In e
ect monopoly is shown to provide better coverage to
those buying insurance but at the cost of limiting participation to insurance. Performing
simulation for di
erent distributions of risk, we nd that monopoly in general performs
(much) better than competition in terms of the realization of the gains from trade across
all traders in equilibrium. However, most of the surplus is retained by the rm and, as a
result, most individuals prefer competitive markets notwithstanding their performance is
generally poorer than monopoly.
