| Abstract: |
The lack of available prices in the Dutch life insurance industry makes
competition an elusive concept that defies direct observation. Therefore, this
paper investigates competition by analysing several factors which may affect
the competitive nature of a market and various indirect measurement
approaches. After discussing various supply and demand factors whic h may
constitute a so-called tight oligopoly, we establish the existence of scale
economies and the importance of cost Xinefficiency, since severe competition
would force firms to exploit available scale economies and to reduce
X-inefficiencies. Both scale economies and X-inefficiencies turn out to be
substantial, although more or less comparable to those found for insurers in
other countries and to other financial institutions. Further, we apply the
Boone indicator, a novel approach to measuring the effects of competition.
This indicator points to limited competition in comparison to other sectors in
the Netherlands. Further investigations of submarkets should reveal where
policy measures in order to promote competition might be appropriate. |