Adverse Selection, Private Information, and Lowballing in Insurance Markets

1990 ◽  
Vol 63 (2) ◽  
pp. 145 ◽  
Author(s):  
Stephen P. D'Arcy ◽  
Neil A. Doherty
Keyword(s):  
Adverse Selection ◽  
Private Information ◽  
Insurance Markets

scholarly journals When Salespeople Manage Customer Relationships: Multidimensional Incentives and Private Information

2019 ◽  
Vol 56 (5) ◽  
pp. 749-766 ◽  
Author(s):  
Minkyung Kim ◽  
K. Sudhir ◽  
Kosuke Uetake ◽  
Rodrigo Canales
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Customer Relationship Management ◽  
Private Information ◽  
Information Acquisition ◽  
Relationship Management ◽  
Selection Effect ◽  
Sales Performance ◽  
Customer Relationships ◽  
Customer Relationship

At many firms, incentivized salespeople with private information about customers are responsible for customer relationship management. Although incentives motivate sales performance, private information can induce moral hazard by salespeople to gain compensation at the expense of the firm. The authors investigate the sales performance–moral hazard trade-off in response to multidimensional performance (acquisition and maintenance) incentives in the presence of private information. Using unique panel data on customer loan acquisition and repayments linked to salespeople from a microfinance bank, the authors detect evidence of salesperson private information. Acquisition incentives induce salesperson moral hazard, leading to adverse customer selection, but maintenance incentives moderate it as salespeople recognize the negative effects of acquiring low-quality customers on future payoffs. Critically, without the moderating effect of maintenance incentives, the adverse selection effect of acquisition incentives overwhelms the sales-enhancing effects, clarifying the importance of multidimensional incentives for customer relationship management. Reducing private information (through job transfers) hurts customer maintenance but has greater impact on productivity by moderating adverse selection at acquisition. This article also contributes to the recent literature on detecting and disentangling customer adverse selection and customer moral hazard (defaults) with a new identification strategy that exploits the time-varying effects of salesperson incentives.

Evidence of Adverse Selection in Crop Insurance Markets

2001 ◽  
Vol 68 (4) ◽  
pp. 685 ◽  
Author(s):  
Shiva S. Makki ◽  
Agapi Somwaru
Keyword(s):  
Adverse Selection ◽  
Crop Insurance ◽  
Insurance Markets

scholarly journals Competitive Insurance Markets and Adverse Selection in the Lab

2013 ◽  
Vol 38 (1) ◽  
pp. 87-113 ◽  
Author(s):  
Dorra Riahi ◽  
Louis Levy-Garboua ◽  
Claude Montmarquette
Keyword(s):  
Adverse Selection ◽  
Insurance Markets
Sign in / Sign up

Export Citation Format

Share Document