The coexistence of distribution systems under price search: Theory and some evidence from insurance
Open accessAbstract
This paper analyzes a pure price search model of an insurance market in which two different search technologies are simultaneously available: sequential search and nonsequential search. Sequential search characterizes firms that sell directly to consumers and nonsequential search characterizes firms who use independent agents that sell the products of a number of different firms. The separation of firms and consumers into the two market sectors is endogenously determined, and the conditions for equilibrium coexistence are derived. The characteristics of price distributions in the two sectors are then compared in a coexistence equilibrium. Price distributions observed in automobile insurance markets are found to be consistent with the predictions of the theoretical model.
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The switching costs for insurance services include search costs, habit, learning, inertia, and transaction costs.
“The switching costs for insurance services include–search costs (the costs of time invested in searching for the information about claims settlement), habit (investment oriented behavior), learning (financial strength of the insurance company), inertia, costs of transaction in terms of contractual and continuity (the costs of time and effort desired for price bargain and administrative charges) as”
From Health insurance policy renewal: an exploration of reputation, performance, and affect to understand customer inertia (2022) · cites this paper as Posey and Tennyson 1998
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Kautish, P., Khare, A., & Sharma, R. (2022) · Journal of Marketing Analytics · doi:10.1057/s41270-021-00134-7 · Cited by 25 · see citing works
- Authors
- Posey, L. L., & Tennyson, S.
- Affiliations
- Pennsylvania State University (US)
- University of Pennsylvania (US)
- Corresponding author
- Tennyson, Sharon
- Venue
- Journal of Economic Behavior & Organization
- Publisher
- Elsevier BV
- Published
- 1998-03
- Volume
- 35
- Issue
- 1
- Pages
- 95-115
- ISSN
- 0167-2681 (ISSN-L)
- OpenAlex
- W2023476481
- Cited by
- 33
- References
- 20
- Citations by year
- 2025: 2 · 2023: 1 · 2021: 2 · 2016: 2 · 2015: 2 · 2014: 1 · 2013: 3 · 2012: 2
- FWCI
- 2.90
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- Journal of Economic Behavior & Organization (publishedVersion, cc-by-nc-nd)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Insurance and Financial Risk Management
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic theories and models
- Keywords
- price search, insurance market, sequential search, independent agents, market coexistence, price distribution, automobile insurance, direct sales
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