Economics Working Papers
Publication Date
2-4-2020
Number
20002
Abstract
In insurance industry, product disclosure statements (PDSs) consist of descriptions of uncertain contingencies by the insurance plans (e.g., “hospital coverage”, “dental coverage”, etc.) and are often very different. In this paper, we model PDSs as information partitions of the state space, which can influence how a consumer perceives the structure of her choice problem and hence her deductible choices. We study a model of an insurance company that aims to promote profit by designing the framing of its PDS. We compare the company’s profits under two PDSs, one of which is coarser than the other. Our main results show that under simple conditions, the PDS consisting of finer partitions of the more expensive states is more profitable.
JEL Classification
D11, D86, D91
Version History
Original Release Date: February 4, 2020
Departments
Department of Economics, Iowa State University
File Format
application/pdf
Length
62 pages
Recommended Citation
Burkovskaya, Anastasia and Li, Jian, "Comparative Profitability of Product Disclosure Statements" (2020). Economics Working Papers: Department of Economics, Iowa State University. 20002.
https://lib.dr.iastate.edu/econ_workingpapers/96
