Application of a Signalling Game to Modelling Incomplete Information in Automobile Insurance
DOI:
https://doi.org/10.18559/SOEP.2015.11.7Keywords:
Simulation games, Motor insurance, InformationAbstract
In this paper we shall study the problem of imperfect information on the automobile insurance market. This problem occurs when an insurance company has insufficient knowledge about their clients' accidents. We show that the problem can be formulated as a signalling game with Nature, policyholder and insurance company in which the policyholder is informed about the type of Nature and the company is not. When formulated in this way the problem can be solved by finding a combination of strategies that are the mutually best response.
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