Insurance market games: Scale effects and public policy (Q1601303)

The authors use a game-theoretic model to study various effects of scale and their public-policy implications in an insurance market. After showing that a unique equilibrium exists under certain conditions for the case in which both buyers and sellers have constant absolute risk aversion, they consider the special case in which the insurers are risk neutral, and analyse how the price and quantity of insurance, as well as other quantities, are affected by the number of insurance firms, the number of customers, and the total amount of capital provided by investors.