Abstract
We develop an equilibrium concept in the Debreu (Proc Natl Acad Sci USA 40(7):588–592, 1954) theory of value tradition for a class of adverse selection economies which includes the Spence (Q J Econ 87(3):355–374, 1973) signaling and Rothschild–Stiglitz (Q J Econ 90(4):629–649, 1976) insurance environments. The equilibrium exists and is optimal. Further, all equilibria have the same individual type utility vector. The economies are large with a finite number of types that maximize expected utility on an underlying commodity space. An implication of the analysis is that the invisible hand works for this class of adverse selection economies.
Original language | English (US) |
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Journal | Economic Theory |
DOIs | |
State | Accepted/In press - Sep 30 2015 |
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Keywords
- Adverse selection equilibrium
- Insurance
- Mutual organization
- Signaling
- The core
- Theory of value
ASJC Scopus subject areas
- Economics and Econometrics
Cite this
Equilibrium with mutual organizations in adverse selection economies. / Blandin, Adam; Boyd, John H.; Prescott, Edward.
In: Economic Theory, 30.09.2015.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Equilibrium with mutual organizations in adverse selection economies
AU - Blandin, Adam
AU - Boyd, John H.
AU - Prescott, Edward
PY - 2015/9/30
Y1 - 2015/9/30
N2 - We develop an equilibrium concept in the Debreu (Proc Natl Acad Sci USA 40(7):588–592, 1954) theory of value tradition for a class of adverse selection economies which includes the Spence (Q J Econ 87(3):355–374, 1973) signaling and Rothschild–Stiglitz (Q J Econ 90(4):629–649, 1976) insurance environments. The equilibrium exists and is optimal. Further, all equilibria have the same individual type utility vector. The economies are large with a finite number of types that maximize expected utility on an underlying commodity space. An implication of the analysis is that the invisible hand works for this class of adverse selection economies.
AB - We develop an equilibrium concept in the Debreu (Proc Natl Acad Sci USA 40(7):588–592, 1954) theory of value tradition for a class of adverse selection economies which includes the Spence (Q J Econ 87(3):355–374, 1973) signaling and Rothschild–Stiglitz (Q J Econ 90(4):629–649, 1976) insurance environments. The equilibrium exists and is optimal. Further, all equilibria have the same individual type utility vector. The economies are large with a finite number of types that maximize expected utility on an underlying commodity space. An implication of the analysis is that the invisible hand works for this class of adverse selection economies.
KW - Adverse selection equilibrium
KW - Insurance
KW - Mutual organization
KW - Signaling
KW - The core
KW - Theory of value
UR - http://www.scopus.com/inward/record.url?scp=84944519877&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84944519877&partnerID=8YFLogxK
U2 - 10.1007/s00199-015-0918-3
DO - 10.1007/s00199-015-0918-3
M3 - Article
AN - SCOPUS:84944519877
JO - Economic Theory
JF - Economic Theory
SN - 0938-2259
ER -