THE PREMIUM-DIVIDEND COMPETITION IN THE PREWAR JAPANESE LIFE INSURANCE INDUSTRY: A GAME-THEORETIC INTERPRETATION

Between 1917 and 1935, Japanese life insurance companies competed with each other on a premium–dividend basis. We propose that such competition took the form of product differentiation, exploiting differences in discount rates or price expectations among policy-holders. Our model shows that under some conditions the introduction of such competition can be beneficial to the competitive companies. It is shown that these conditions were satisfied at that time, and that more detailed factors are also consistent with the model. JEL Classification Numbers: C72, D43, G22, N25.