The Nightmare of the Leader: The Impact of Deregulation on an Oligopoly Insurance Market

This paper explores the impact of deregulation of licensing on an oligopoly insurance market. We show that deregulation of licensing in a Stackelberg-type oligopoly market may not have any impact on the leader’s output if the number of firms increases but the market structure remains. On the other hand, if the market structure is reorganized because of the deregulation of licensing, the leader’s output could be significantly reduced after deregulation. By using the unique data of the insurance market in Taiwan, this paper provides further empirical evidence to demonstrate that the deregulation of a Stackelberg-type oligopoly insurance market reduces the outputs of the market leader more than those of the market followers.