A general method of computing the cut-off point in adverse selection models

R. Guo and P. Zhang

Applied Economics, 2014, vol. 46, issue 33, 4116-4124

Abstract: Based on the model set-up in Laffont and Tirole (1986)'s seminal paper 'Using Cost Observation to Regulate Firms', we provide a general method of computing the cut-off point above which inefficient firms should be shut down under asymmetric information. With the help of the transversality conditions in optimal control, this method of computing the cut-off point is directly applicable to other adverse selection models under asymmetric information provided the optimization problem in these models could be written as an optimal control problem.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2014.952890 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:applec:v:46:y:2014:i:33:p:4116-4124

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2014.952890

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().