Coopetitive Strategies of Japanese Insurance Firms A Game-Theory Approach

This paper examines how coopetition affects the level of investment in Japanese insurance companies. This investment has two types of effects: one is the "spillover effect" arising from an insurance firm's benefit from the effect of rivals' investments regardless of its own investments, and the other is the "demand-changing effect" arising from change to potential demand. The study uses the case of the Japanese insurance market, where insurance firms coopitate by investing cooperatively through an insurance association to lower the accident probability of the insured, and by selling insurance policies competitively to increase their own profit.The study's conclusion is that each insurance firm tends to choose underinvestment when the spillover effect is relatively large and when the demand-changing effect is nonnegative. In this case, achieving a coopetitive insurance market through the insurance association creates more value in the investment stage.