Equilibrium in a reinsurance market: Introducing taxes |
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| Authors: | Pierre-François Koehl Jean-Charles Rochet |
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| Institution: | 1. GREMAQ, Université Toulouse I, place Anatole France, 31042, Toulouse cédex, France
2. IDEI, Université Toulouse I, place Anatole France, 31042, Toulouse cédex, France
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| Abstract: | We introduce profit taxation in Borch's 1962] model of a competitive insurance market. We analyze the impact of taxation on equilibrium prices and characterize the cases where optimal risk sharing is preserved. In the case of Constant Relative Risk Aversion (CRRA) utility functions, this abstract characterization is translated into simple conditions involving the solvency ratios of the companies. The case of Constant Absolute Risk Aversion (CARA) utility functions is also studied. |
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