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Asymmetric Information in Insurance: General Testable Implications

Pierre-André Chiappori, Bruno Jullien, Bernard Salanié and François Salanié
The RAND Journal of Economics
Vol. 37, No. 4 (Winter, 2006), pp. 783-798
Published by: Wiley on behalf of RAND Corporation
Stable URL: http://www.jstor.org/stable/25046274
Page Count: 16
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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.
Asymmetric Information in Insurance: General Testable Implications
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Abstract

Several recent articles on empirical contract theory and insurance have tested for a positive correlation between coverage and ex post risk, as predicted by standard models of pure adverse selection or pure moral hazard. We show here that the positive correlation property can be extended to general setups: competitive insurance markets and cases where risk aversion is public. We test our results on a French dataset. Our tests confirm that the estimated correlation is positive; they also suggest the presence of market power.

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