https://macropaperwarehouse.com/authors/fan-wu/Fan WuHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/competing-under-information-heterogeneity-evidence-from-auto-insurance/https://macropaperwarehouse.com/papers/competing-under-information-heterogeneity-evidence-from-auto-insurance/<p>This paper studies imperfect competition in selection markets where competing firms have heterogeneous information about consumers — a layer of asymmetry distinct from the classic buyer-seller information gap. The central questions are: how do inter-firm information asymmetries shape equilibrium pricing, consumer sorting, and market efficiency; and whether a centralized bureau that aggregates and equalizes firms&rsquo; risk information can promote competition and improve welfare.</p> <p>The empirical setting is the Italian mandatory motor vehicle liability insurance market (Responsabilità Civile Auto). The authors use the IPER dataset from IVASS, a nationally representative panel of matched insurer-insuree contracts covering 124,428 liability insurance contracts for new customers in the province of Rome from 2013 to 2021. The panel tracks consumers across insurer switches, enabling construction of individual-specific risk estimates from ex-post claim records using Poisson regressions for claim frequency and log-normal regressions for claim severity. The analysis focuses on the top 10 largest firms plus a composite fringe firm.</p>