1 option
Price Equilibrium, Efficiency, and Decentralizability in Insurance Markets / Richard Arnott, Joseph E. Stiglitz.
- Format:
- Book
- Author/Creator:
- Arnott, Richard.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w3642.
- NBER working paper series no. w3642
- Language:
- English
- Subjects (All):
- Equilibrium (Economics).
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1991.
- Cambridge, Mass. : National Bureau of Economic Research, 1991.
- Summary:
- In this paper, we investigate the descriptive and normative properties of competitive equilibrium with moral hazard when firms offer "price contracts" which allow clients to purchase as much insurance as they wish at the quoted prices. We show that a price equilibrium always exists and is one of three types: i) zero profit price equilibrium - zero profit, zero effort, full insurance ii) positive profit price equilibrium - positive profit, positive effort, partial insurance iii) zero insurance price equilibrium - zero insurance, zero profit, positive effort. We also demonstrate circumstances under which the linear taxation of price insurance allows decentralization of the social optimum (conditional on the unobservability of effort), and when it, does not, whether it is at least utility-improving.
- Notes:
- Print version record
- March 1991.
- Includes bibliographical references.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.