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On the Emergence of Private Insurance in Presence of Mutual Agreements

Bourlès, Renaud (2009): On the Emergence of Private Insurance in Presence of Mutual Agreements.

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Abstract

The aim of this paper is to analyze the impact of the existence of mutual firms on the behavior of an insurance company and more precisely to study in which situations a private insurance firm may replace mutual agreements. Our approach differs from the existing literature as we integrate the investment choices of the company and the fact that, because it commits on a fixed contract, it can become insolvent. In such a situation we are able to characterize the unique optimal choices of an entrant company and the conditions favoring or preventing its appearance.

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