Randomization with Asymmetric Information / Richard J. Arnott, Joseph E. Stiglitz.

Format:

Book

Author/Creator:

Arnott, Richard J.

Contributor:

National Bureau of Economic Research.

Stiglitz, Joseph E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2507.

NBER working paper series no. w2507

Language:

English

Subjects (All):

Insurance--Mathematical models.

Insurance.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1988.

Cambridge : National Bureau of Economic Research, 1988.

Summary:

It is by now well-known that, in the presence of moral hazard or adverse selection, randomization of insurance premia and benefits may be Pareto efficient. This paper: i) provides a typology of the various forms that randomization may take; ii) derives necessary and/or sufficient conditions for the desirability of these various forms of randomization; iii) obtains some simple characterization theorems of the efficient random policies; iv) gives some intuition behind the results; and v) considers why randomization appears to occur less often in practice than the theory suggests it should.

Notes:

Print version record

February 1988.