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POTENTIAL GAMES WITH AGGREGATION IN NON-COOPERATIVE GENERAL INSURANCE MARKETS
Published online by Cambridge University Press: 17 October 2016
Abstract
In the global insurance market, the number of product-specific policies from different companies has increased significantly, and strong market competition has boosted the demand for a competitive premium. Thus, in the present paper, by considering the competition between each pair of insurers, an N-player game is formulated to investigate the optimal pricing strategy by calculating the Nash equilibrium in an insurance market. Under that framework, each insurer is assumed to maximise its utility of wealth over the unit time interval. With the purpose of solving a game of N-players, the best-response potential game with non-linear aggregation is implemented. The existence of a Nash equilibrium is proved by finding a potential function of all insurers' payoff functions. A 12-player insurance game illustrates the theoretical findings under the framework in which the best-response selection premium strategies always provide the global maximum value of the corresponding payoff function.
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- Copyright © Astin Bulletin 2016
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