Hard evidence and welfare in adverse selection environments
No MWP 2017/10, Economics Working Papers from European University Institute
I consider environments in which an agent with private information can acquire arbitrary hard evidence about his type before interacting with a principal. In a broad class of screening models, I show that there is always an evidence structure that interim Pareto improves over the no-evidence benchmark whenever some types of the agent take an outside option in the benchmark case, and additional weak conditions, including either a single-crossing condition or state-independence of the principal's payoffs, are satisfied. I show that the sufficient conditions are tight and broadly applicable. Addressing concerns about multiple equilibria, I show how a planner can restrict the available evidence to ensure that an equilibrium which interim Pareto-improves over the benchmark case is obtained. Furthermore, I show that Pareto-improving evidence can arise endogenously when agents choose what evidence to acquire (and disclose).
Keywords: Information Economics; Hard Evidence; Mechanism Design; Microeconomic Theory; Insurance. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://cadmus.eui.eu/bitstream/handle/1814/46689/MWP_2017_10.pdf main text
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eui:euiwps:mwp2017/10
Access Statistics for this paper
More papers in Economics Working Papers from European University Institute Badia Fiesolana, Via dei Roccettini, 9, 50014 San Domenico di Fiesole (FI) Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Cécile Brière ().