Asymmetric Dependence between Efficiency and Market Power in the Taiwanese Life Insurance Industry

Authors

  • Chung-Chu Chuang Tamkang University, Department of Management Sciences, New Taipei City, Taiwan
  • Yu-Chieh Tang Tamkang University, Department of Electrical Engineering, New Taipei City, Taiwan

DOI:

https://doi.org/10.2298/PAN1504511C

Keywords:

Market power, Efficiency, Stochastic frontier approach, Asymmetric dependence

Abstract

Both market power and efficiency contribute to the viability of the insurer, making them essential for the management of life insurance companies. This study measured efficiency using the stochastic frontier approach based on the translog cost function. We then investigated the relationship between efficiency and market power using generalized extreme value analysis. The results show a strong nonlinear, asymmetric dependence between efficiency and market power of leading Taiwanese insurers. In other words, companies with greater market power do not necessarily exhibit greater efficiency. This study provides a reference to aid life insurance companies in the formulation of operational strategies.

Key words: Market power, Efficiency, Stochastic frontier approach, Asymmetric dependence.
JEL: D40, G22, L11.

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Published

2015-10-10

How to Cite

Chuang, C.-C., & Tang, Y.-C. (2015). Asymmetric Dependence between Efficiency and Market Power in the Taiwanese Life Insurance Industry. Panoeconomicus, 62(4), 511–525. https://doi.org/10.2298/PAN1504511C

Issue

Vol. 62 No. 4 (2015)

Section

Scientific review