Non-Exclusive Insurance with Free Entry: A Pedagogical Note

Pradeep Dubey and John Geanakoplos

Department of Economics Working Papers from Stony Brook University, Department of Economics

Abstract: We consider the Rothschild-Stiglitz model of insurance but without the exclusivity constraint. It turns out that there always exists a unique equilibrium, in which the reliable and unreliable consumers take out a primary insurance up to its quantity limit, and the unreliable take out further secondary insurance at a higher premium. We provide a simple proof of this result (extended to multiple types of consumers) with the hope that it may be pedagogically useful.

Date: 2018
New Economics Papers: this item is included in nep-ias and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:nys:sunysb:18-05

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