PRODUCT DIFFERENTIATION AND PERFORMANCE IN INSURANCE MARKETS (original) (raw)

Product differentiation and systematic risk: theory and empirical evidence

2011

Abstract: Firms producing differentiated products have high margins and therefore low risk. As a result firms invest more into developing differentiated products when they perceive risk is high. Higher risk also implies higher product skewness towards more differentiated products and therefore higher average markups.

Vertical Product Differentiation and Adverse Selection: An Experimental Note

SSRN Electronic Journal, 2001

In three identical laboratory markets, sellers possess products whose quality is both exogenously and endogenously determined. Buyers can observe products' quality only in the last session of each experiment. It is also assumed an uneven distribution of income among buyers. We study whether a separating equilibrium arises in such a context, as in traditional models of vertical product differentiation, thus reducing adverse selection outcomes.

Health Insurance and Competition in Markets for Differentiated Medical Products

2015

I study duopolistic market for differentiated medical products. Medical providers decide whether to sell on the spot market to sick consumers or to sell through competitive insurance market to healthy consumers. While shopping for insurance consumers know only the distribution of possible medical needs they may have if they get sick. Only when getting sick their actual medical need reveals and diagnosed. Hence consumers on the insurance market have lower taste differentiation than the sick consumers who are shopping on the spot market. I find that in equilibrium providers sell only on the insurance market, even though this intensifies competition because of lower taste differentiation. Competition between providers under insurance sales brings premiums low enough to motivate consumers buying insurance for both products. Insurance sales generate effi cient horizontal product differentiation, lower prices, and effi ciently higher quality. JEL Classification: : I11, I13, L1 Key-words: ...

Endogenous differentiation of information goods under uncertainty

Proceedings of the 3rd ACM conference on Electronic Commerce - EC '01, 2001

Information goods can be reconfigured at low cost. Therefore, firms can choose how to differentiate their products at a frequency comparable to price changes. However, doing so effectively is complicated by uncertainty about customer preferences, compounded by the fact that the search for a good product niche is carried out in competition with other searching firms.

An economic analysis of product differentiation under latent separability

2003

This paper develops an analysis of markets for differentiated products. It relies on the concept of latent separability for consumer preferences. As proposed by Blundell and Robin, latent separability assumes that purchased products are allocated in the production of latent intermediate utility-yielding goods. Product differentiation can arise when each product makes a different contribution to the production of the latent goods. Latent separability is particularly attractive in the investigation of markets for branded products where the number of brands is large. It allows focusing on the demand for a smaller number of latent goods. Our approach is based on a quadratic almost ideal demand system (Q-AIDS), which provides a flexible representation of consumer behavior. Its usefulness is illustrated in an empirical analysis of markets for carbonated soft drinks (CSD). First, the econometric analysis accounts for the endogeneity of prices for differentiated brands. Second, it provides an empirical evaluation of the number of relevant latent goods. Third, it shows how latent separability improves the efficiency of parameter estimates. Finally, it generates estimates of shadow prices of the latent goods, information that gives useful insights into the economics of differentiated products.

A note on price competition in product differentiation models

CORE Discussion Papers, 2009

We define a two-variant model of product differentiation which, depending on the number of consumers prefering one variant to the other, provides equilibrium prices reflecting the natural valuation of these variants by the market.