Bilateral Information Disclosure in Adverse Selection Markets with Nonexclusive Competition / Joseph E. Stiglitz, Jungyoll Yun, Andrew Kosenko.

Format:

Book

Author/Creator:

Stiglitz, Joseph E.

Contributor:

National Bureau of Economic Research.

Yun, Jungyoll.

Kosenko, Andrew.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27041.

NBER working paper series no. w27041

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

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.

Notes:

Print version record

April 2020.