Bilateral Information Disclosure in Adverse Selection Markets with Nonexclusive Competition

Joseph Stiglitz, Jungyoll Yun and Andrew Kosenko

No 27041, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study insurance markets with nonexclusive contracts, introducing bilateral endogenous information disclosure about insurance sales and purchases by firms and consumers. We show that a competitive equilibrium exists under remarkably mild conditions, and characterize the unique equilibrium outcome. With two types of consumers the outcome consists of a pooling contract which maximizes the well-being of the low risk type (along the zero profit pooling line) plus a supplemental (undisclosed and nonexclusive) contract that brings the high risk type to full insurance (at his own odds). We show that this outcome is extremely robust and constrained Pareto efficient. Consumer disclosure and asymmetric equilibrium information flows are critical in supporting the equilibrium.

JEL-codes: D43 D82 D86 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-com, nep-cta, nep-gen, nep-ias and nep-mic
Note: TWP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Kosenko, Andrew & Stiglitz, Joseph & Yun, Jungyoll, 2023. "Bilateral information disclosure in adverse selection markets with nonexclusive competition," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 144-168.

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Journal Article: Bilateral information disclosure in adverse selection markets with nonexclusive competition (2023)
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