Modeling the Private Sector Insurance Industry of Iran Using Game Theory Approach (A Case study)



In this research, the market of private sector insurance industry of Iran has been modeled, using the "Game Theory", where performance and competition of three big private insurance companies has been investigated as a case study and the "Game Theory" has been used as a decision making tool for achieving a status of optimum satisfaction of all three companies.
In the research process, the competition of three insurance companies of "Parsian", "Mellat" and "Kar Afarin" has been investigated and with regard to the implemented model, it results in a Pareto solution.
It shows that in case these three companies collaborate to have a cooperative game for retaining the market share of private sector, the biggest loss of Utility in portfolio is minimized while the cumulated loss of Utility in portfolio declines to the least, subject to adopting the "expansion of sales network strategy" by "Parsian" insurance company, "prompt compensation strategy" by "Mellat" co. and "advertisement strategy" by "Kar Afarin" co. at the same time. The companies considerably benefit from these strategies while do not harm much to the other players. In this regard while every single company gains Utility comparatively by minimizing the loss of its Utility in portfolio, the private sector of insurance industry whose considerable share belongs to these three companies , will suffer the least probable loss.
As a conclusion, using this cooperative and compromise model resulted in a Pareto solution, since the model has led to a same solution in both Utility loss of each single company and cumulated Utility loss of portfolios of all companies.
JEL Classification: C71, G22