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Entry, Size Distribution, Scale, and Scope Economies in the Life Insurance Industry

S. Kellner and G. Frank Mathewson
The Journal of Business
Vol. 56, No. 1 (Jan., 1983), pp. 25-44
Stable URL: http://www.jstor.org/stable/2352744
Page Count: 20
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Entry, Size Distribution, Scale, and Scope Economies in the Life Insurance Industry
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Abstract

This article estimates the production parameters for life insurance firms. To do so, we first build a firm and industry model which yields an equilibrium distribution of firm size predicated on the firm's maximizing profits and segmenting markets in the face of variability in the degree of information held by consumers on the attributes of life insurance policies issued by different firms. We estimate directly the first-order conditions defining the optimal outputs for each firm. Our results indicate the absence of any natural monopoly effects and are consistent with the hypothesis of zero profits in the industry.

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