Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/205279
Authors: 
Hinloopen, Jeroen
Zhou, Lting
Year of Publication: 
2018
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2018-090/VII
Abstract: 
We formally link insurance markets with product markets and identify a demand effect of insurance: if risk-averse consumers can buy insurance against possible product failure, there will be some additional consumers that buy the product because they can also purchase protection. The concomitant upward pressure on price is further fueled by those consumers that have a higher willingness to pay if they can also buy insurance. But a higher price causes those consumers to leave the market that would have bought the product absent insurance. Introducing insurance thus has an ambiguous effect on price, consumers' surplus, and total surplus.
Subjects: 
product failure
insured loss
insurance
product markets
demand effect of insurance
JEL: 
D21
D43
L13
Document Type: 
Working Paper

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