Screening equilibria in experimental markets

Lisa L. Posey and Abdullah Yavas ()
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Lisa L. Posey: Penn State University, Business Building, University Park, PA 16802, USA, e-mail: llp3@psu.edu

The Geneva Risk and Insurance Review, 2007, vol. 32, issue 2, 147-167

Abstract: We conduct an experimental test of a screening model of an insurance market with asymmetric information. We first conduct three sessions in which the proportion of high risk buyers is such that a separating equilibrium should exist. We then conduct three more sessions in which the only change we make is decreasing the proportion of high risks such that the equilibrium is now a pooling equilibrium. In both treatments, the observed behavior converges to the equilibrium prediction. The Geneva Risk and Insurance Review (2007) 32, 147–167. doi:10.1007/s10713-007-0007-z

Date: 2007
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