Quality of After-sales Services in a Competitive Insurance Sector
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SubjectInsurance sector; Unverifiable quality; After-sales services; Reputation; Bertrand competition
This paper tackles the issue of unverifiable quality of after-sales insurance services, such as a prompt reimbursement of damages. A dynamic model is introduced in order to allow reputation to emerge as a means of disciplining insurance firms to deliver high quality. The equilibrium of a repeated Bertrand game among the insurers is analysed and conditions are derived under which more concentration in the insurance industry can lead to greater equilibrium consumer welfare.
The Geneva Risk and Insurance Review
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