Equilibrium with mutual organizations in adverse selection economies

Adam Blandin, John H. Boyd, Edward Prescott

Research output: Contribution to journalArticle

1 Citation (Scopus)

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 languageEnglish (US)
JournalEconomic Theory
DOIs
StateAccepted/In press - Sep 30 2015

Fingerprint

Adverse selection
Commodities
Expected utility
Insurance

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 journalArticle

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