Competitive Pooling: Rothschild-Stiglitz Reconsidered

Pradeep Dubey and J. Geanakoplos

Department of Economics Working Papers from Stony Brook University, Department of Economics

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 into our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn't) and is unique.

JEL-codes: D4 D41 D5 D52 D81 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (4)

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Journal Article: Competitive Pooling: Rothschild-Stiglitz Reconsidered (2002)
Working Paper: Competitive Pooling: Rothschild-Stiglitz Reconsidered (2002)
Working Paper: Competitive Pooling: Rothschild-Stiglitz Reconsidered (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:nys:sunysb:01-10

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