Competitive Pooling: Rothschild-Stiglitz Reconsidered

Pradeep Dubey and John Geanakoplos ()
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John Geanakoplos: Yale University, Cowles Foundation, https://economics.yale.edu/people/faculty/john-geanakoplos

No 1346R2, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household's deliveries are the same at all pools. The Rothschild-Stiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story in our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn't) and is unique.

Keywords: competitive pooling; insurance; adverse selection; signalling; refined equilibrium; separating equilibrium (search for similar items in EconPapers)
JEL-codes: D4 D41 D5 D52 D81 D82 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001-12, Revised 2002-02
New Economics Papers: this item is included in nep-com
Note: CFP 1048
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Citations: View citations in EconPapers (92)

Published in Quarterly Journal of Economics (2002), 117(4): 1529-1570

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Journal Article: Competitive Pooling: Rothschild-Stiglitz Reconsidered (2002)
Working Paper: Competitive Pooling: Rothschild-Stiglitz Reconsidered (2001)
Working Paper: Competitive Pooling: Rothschild-Stiglitz Reconsidered (2001)
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