On the Rate Structure of the American Life Insurance Market

This article re-examines the conclusion of previous studies that price dispersion is extreme in the American whole life insurance market. We take an axiomatic approach to the problem of measuring “price” dispersion in the market for the multiparameter whole life contracts, studying the distribution across contract offers of a price index which is uniquely determined by two conditions. In contrast to the accepted wisdom, we find that the derived measure of price dispersion is only 3.6% and that much of this dispersion can be accounted for by measurement error.     

How Are Firms Sold?

As measured by the number of bidders that publicly attempt to acquire a target, the takeover arena in the 1990s appears noncompetitive. However, we provide novel data on the pre‐public, private takeover process that indicates that public takeover activity is only the tip of the iceberg of actual takeover competition during the 1990s. We show a highly competitive market where half of the targets are auctioned among multiple bidders, while the remainder negotiate with a single bidder. In event study analysis, we find that the wealth effects for target shareholders are comparable in auctions and negotiations.     

Capital Gains Taxes and Asset Prices: Capitalization or Lock‐in?

This paper demonstrates that the equilibrium impact of capital gains taxes reflects both the capitalization effect (i.e., capital gains taxes decrease demand) and the lock‐in effect (i.e., capital gains taxes decrease supply). Depending on time periods and stock characteristics, either effect may dominate. Using the Taxpayer Relief Act of 1997 as our event, we find evidence supporting a dominant capitalization effect in the week following news that sharply increased the probability of a reduction in the capital gains tax rate and a dominant lock‐in effect in the week after the rate reduction became effective.