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MARKET POWER IN THE PROPERTY/CASUALTY INSURANCE INDUSTRY
Author(s) -
Hogan Arthur M. B.,
Witt Robert C.
Publication year - 1998
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/j.1540-6296.1998.tb00084.x
Subject(s) - economic rent , collusion , property insurance , market power , work (physics) , business , power (physics) , factor market , market structure , economics , monetary economics , actuarial science , market economy , finance , casualty insurance , insurance policy , industrial organization , monopoly , quantum mechanics , mechanical engineering , physics , engineering
Pro‐consumer groups have charged that insurance firms are able to exercise market power to reduce coverage and/or increase rates. The ability of firms to earn economic rents (abnormal profits) is a factor in banks' interest in entering insurance markets. In classical economics such collusion is usually only possible with cartels. Recent work, examining the relationship between industry structure indicates that the power that can be exercised by cartels may be more limited than under the classical paradigms. We examine the ability of insurers to exercise market power in light of these modern theories.