Equilibrium with mutual organizations in adverse selection economies

Adam Blandin, John H. Boyd () and Edward Prescott
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John H. Boyd: University of Minnesota

Economic Theory, 2016, vol. 62, issue 1, No 2, 3-13

Abstract: 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.

Keywords: Adverse selection equilibrium; Theory of value; Insurance; Signaling; Mutual organization; The core (search for similar items in EconPapers)
JEL-codes: C62 D46 D82 G22 G29 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Working Paper: Equilibrium with Mutual Organizations in Adverse Selection Economies (2015)
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DOI: 10.1007/s00199-015-0918-3

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