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Conduct effects of gradual entry liberalization in insurance

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Abstract

The effects of rate regulation on insurance have been profusely investigated in the empirical literature but less is known about the effects of entry liberalization.

We investigate the effects of an entry liberalization process on conduct of insurance firms under a rate regulation system. An explicit model of oligopolistic interaction is proposed and an application to the Portuguese auto-insurance market is reported.

The results show that coordination between insurance firms was only temporarily upset by a gradual liberalization on entry conditions, with firms resuming almost immediately a coordinated equilibrium.

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Authors and Affiliations

  1. Faculdade de Economia, Universidade Nova de Lisboa, Travessa Estêvão Pinto, P-1000, Lisboa, Portugal

    Pedro Pita Barros

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  1. Pedro Pita Barros
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Additional information

I am thankful to Luís Cabrai, António Leite, José Mata, Vasco Santos, and the referees for useful suggestions. Financial support from an EC Human Capital Mobility Fellowship, grant ERBCHBGCT920147, and the hospitality of Universitat Autònoma de Barcelona are gratefully acknowledged. The usual disclaimer applies.

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Barros, P.P. Conduct effects of gradual entry liberalization in insurance. J Regul Econ 8, 45–60 (1995). https://doi.org/10.1007/BF01066599

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