ADMINISTERED PRICES AND THE MARKET REACTION: THE CASE OF URBAN CORE PROPERTY INSURANCE.

The article investigates why property insurance can be difficult to obtain in urban core areas in the U.S. Federal programs have been instituted to help alleviate the problem, but the causes have attracted little attention from researchers. The author presents an empirical study of fire losses in various neighborhoods of Boston, Massachusetts. Regression analysis on fire-loss and insurance company data identifies price ceilings as the chief cause of insufficient availability of fire insurance. At prevailing prices insurance firms realize losses, and thus stop insuring certain areas.