Bargaining and inequity aversion: On the efficiency of the double auction

In a bargaining setting with asymmetrically informed, inequity-averse parties, a fully efficient mechanism (i.e., the double auction) exists if and only if compassion is strong. Less compassionate parties do not trade in the double auction in the limit of strong envy.     

Incentive effects in the demand for health care: a bivariate panel count data estimation

This paper contributes in three dimensions to the literature on health care demand. First, it features the first application of a bivariate random effects estimator in a count data setting, to permit the efficient estimation of this type of model with panel data. Second, it provides an innovative test of adverse selection and confirms that high‐risk individuals are more likely to acquire supplemental add‐on insurance. Third, the estimations yield that in accordance with the theory of moral hazard, we observe a much lower frequency of doctor visits among the self‐employed, and among mothers of small children. Copyright © 2002 John Wiley & Sons, Ltd.     

New Developments in the Theory of Adverse Selection in Competitive Insurance

We provide an overview of the paths taken to understand existence and efficiency of equilibrium in competitive insurance markets with adverse selection since the seminal work by Rothschild and Stiglitz (1976). A stream of recent work reconsiders the strategic foundations of competitive equilibrium by carefully modelling the market game.     

An evolutionary analysis of insurance markets with adverse selection

The equilibrium nonexistence problem in Rothschild and Stiglitz's insurance market is reexamined in a dynamic setting. Insurance firms are boundedly rational and offer menus of insurance contracts which are periodically revised: profitable competitors' contracts are imitated and loss-making contracts are withdrawn. Occasionally, a firm experiments by withdrawing or innovating a random set of contracts. We show that Rothschild and Stiglitz's candidate competitive equilibrium contracts constitute the unique long-run market outcome if innovation experiments are restricted to contracts which are sufficiently “similar” to those currently on the market.     

Surety Bonds with Fair and Unfair Pricing

Surety bonds are instruments used in public and private procurement to avoid the problem of contractor bankruptcy. A surety company issuing such a bond guarantees to either finish the project itself or pay the bond to the procurement agency in case of contractor's bankruptcy. This situation is analysed under the assumption that the bond is either priced fairly, or a risk loading that is proportional to the money at risk is imposed. If the surety is priced fairly, full insurance (or even overinsurance) is optimal. If the surety is priced unfairly, more solvent contractors are more likely to win, thus the problem of abnormally low tenders is alleviated.     

Versicherungsbetrug aus vertragstheoretischer Sicht

Insurance fraud is a significant economic problem. Following the deregulation of the German insurance market in 1994, contractual features are now possible which were previously restricted. Therefore, there is a need to analyse the insurance fraud reduction potential of this instrument. This paper investigates three forms of insurance fraud: ?Costly State Verification“, ? Costly State Falsification“ and third party fraud. Consequences for the optimal contractual design are deduced.     

Testing rebalancing strategies for stock-bond portfolios across different asset allocations

We compare the risk-adjusted performance of stock–bond portfolios between rebalancing and buy-and-hold across different asset allocations by reporting statistical significance levels. Our investigation is based on a 30-year dataset and incorporates the financial markets of the United States, the United Kingdom and Germany. To draw useful recommendations to investment management, we implement a history-based simulation approach which enables us to mimic realistic market conditions. Even if the portfolio weight of stocks is very low, our empirical results show that a frequent rebalancing significantly enhances risk-adjusted portfolio performance for all analysed countries and all risk-adjusted performance measures.     

Nachhaltigkeitsziele in der Wirtschaftspolitik — volkswirtschaftliche Überlegungen

Wirtschaftsdienst - Through the canon of the UN SDGs or the European Green Deal, sustainability goals are finding their way into legislation. From an economic point of view, these targets often aim...