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Why is automobile insurance in Philadelphia so damn expensive?

Smith, E and Wright, R (1991) Why is automobile insurance in Philadelphia so damn expensive? UNSPECIFIED. Federal Reserve Bank of Minneapolis Staff Report 139.

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Abstract

We document and attempt to explain the observation that automobile insurance premiums vary dramatically across local markets. We argue high premiums can be attributed to the large numbers of uninsured motorists in some cities, while at the same time, the uninsured motorists can be attributed to high premiums. We construct a simple noncooperative equilibrium model, where limited liability can generate inefficient equilibria with uninsured drivers and high, yet actuarially fair, premiums. For certain parameterizations, an optimal full insurance equilibrium and inefficient high price equilibria with uninsured drivers exist simultaneously, consistent with the observed price variability across seemingly similar cities.

Item Type: Monograph (UNSPECIFIED)
Uncontrolled Keywords: Insurance industry ; Philadelphia (Pa.)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 29 Jun 2012 11:04
Last Modified: 17 Aug 2017 18:11
URI: http://repository.essex.ac.uk/id/eprint/2699

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