Asymmetric dependence between efficiency and market power in the Taiwanese life insurance industry | Zendy

Chung-Chu Chuang | Zendy; Yu-Chieh Tang | Zendy

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Asymmetric dependence between efficiency and market power in the Taiwanese life insurance industry

Author(s) -

Chung-Chu Chuang,

Yu-Chieh Tang

Publication year - 2015

Publication title -

panoeconomicus

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.289

H-Index - 14

eISSN - 2217-2386

pISSN - 1452-595X

DOI - 10.2298/pan1504511c

Subject(s) - life insurance , market power , value (mathematics) , function (biology) , stochastic frontier analysis , power (physics) , actuarial science , insurance industry , economics , econometrics , business , microeconomics , production (economics) , statistics , mathematics , physics , quantum mechanics , evolutionary biology , biology , monopoly

Both market power and efficiency contribute to the viability of the insurer, making them essential for the management of life insurance companies. This study measured efficiency using the stochastic frontier approach based on the translog cost function. We then investigated the relationship between efficiency and market power using generalized extreme value analysis. The results show a strong nonlinear, asymmetric dependence between efficiency and market power of leading Taiwanese insurers. In other words, companies with greater market power do not necessarily exhibit greater efficiency. This study provides a reference to aid life insurance companies in the formulation of operational strategies

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