Equilibrium with Mutual Organizations in Adverse Selection Economies

Adam Blandin, John H. Boyd and Edward Prescott

No 717, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: An equilibrium concept in the Debreu (1954) theory-of-value tradition is developed for a class of adverse selection economies and applied to the Spence signaling and Rothschild-Stiglitz (1976) adverse selection 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)
Pages: 14 pages
Date: 2015-01-09
New Economics Papers: this item is included in nep-ias, nep-mic and nep-upt
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Equilibrium with mutual organizations in adverse selection economies (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:717

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