Pay What Your Dad Paid: Commitment and Price Rigidity in the Market for Life Insurance
2019/08/20
研討會日期 : 2019-08-20
時間 : 14:30
主講人 : Professor Pei-Chang Yu (余沛成)
主持人 : Professor Wan-Jung Cheng
地點 : Conference Room B110
演講者簡介 : Professor Yu received his Ph.D. in Economics from University of Minnesota in 2016. He is currently Lecturer in Economics at UNSW Australia. His research fields are Microeconomic Theory, Behavioral Economics, Public Economics.
演講摘要 : Life insurance premiums display significant rigidity in the data, on average adjusting once every 3 years by more than 10%. This contrasts with the underlying marginal cost which exhibits considerable volatility due to the movements in interest and mortality rates. We build a model where policyholders are held-up by long-term insurance contracts resulting in a time inconsistency problem for the firms. The optimal contract takes the form of a simple cutoff rule: premiums are rigid for cost realizations smaller than the threshold, while adjustments must be large and are only possible when cost realizations exceed it. We use a calibrated version of the model to show that it matches the data and captures several aspects of premium rigidity in the cross-section and over time.
