A note on uniqueness in game-theoretic foundations of the reactive equilibrium

Wanda Mimra and Achim Wambach

No 483, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Riley (1979)'s reactive equilibrium concept addresses problems of equilibrium existence in competitive markets with adverse selection. The game-theoretic interpretation of the reactive equilibrium concept in Engers and Fernandez (1987) yields the Rothschild-Stiglitz (1976)/Riley (1979) allocation as an equilibrium allocation, however multiplicity of equilibrium emerges. In this note we imbed the reactive equilibrium's logic in a dynamic market context with active consumers. We show that the Riley/Rothschild-Stiglitz contracts constitute the unique equilibrium allocation in any pure strategy subgame perfect Nash equilibrium.

Keywords: asymmetric information; competitive insurance market; contract addition; reactive equilibrium (search for similar items in EconPapers)
JEL-codes: C72 D82 G22 L10 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cta, nep-gth, nep-ias and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/103461/1/799364797.pdf (application/pdf)

Related works:
Journal Article: A note on uniqueness in game-theoretic foundations of the reactive equilibrium (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:483

DOI: 10.2139/ssrn.2515395

Access Statistics for this paper

More papers in CFS Working Paper Series from Center for Financial Studies (CFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().