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The standard solution to adverse selection is the separating equilibrium introduced by Rothschild and Stiglitz. Usually, the Rothschild-Stiglitz argument is developed in a model that allows for two states of the world only. In this paper adverse selection is dis-cussed for continuous loss...
Persistent link: https://www.econbiz.de/10005566318
debt release would have an ambiguous effect on labour supply. While resulting in a partial loss for creditors, it would … permit debtors to get out of debt. A Pareto improvement thus does not seem to be possible. When taking the taxpayers as an …
Persistent link: https://www.econbiz.de/10005700808
We measure the consequences of asymmetric information and imperfect competition in the Italian lending market. We show that banks' optimal price response to an increase in adverse selection varies with competition. Exploiting matched data on loans and defaults, we estimate models of demand for...
Persistent link: https://www.econbiz.de/10011268346
We examine equilibria in competitive insurance markets with adverse selection when wealth differences arise endogenously from unobservable savings or labor supply decisions. The endogeneity of wealth implies that high risk individuals may ceteris paribus exhibit the lower marginal willingness to...
Persistent link: https://www.econbiz.de/10005055319
We consider a regulator providing deposit insurance to a bank with private information about its investment portfolio. As typical in practice, we assume that the regulator does not commit to auditing after any risk report from the bank. We first show that the optimal contract can be implemented...
Persistent link: https://www.econbiz.de/10005585609
This paper investigates the role of fiat money in decentralized markets, where producers have private information about the quality of the goods they supply. Money is divisible, terms of trade are determined endogenously, and agents can finance their consumption with money or with real...
Persistent link: https://www.econbiz.de/10005627913
We consider a closed economy where a risk neutral bank competes with a competitive bond market. Firms can finance a risky project either by a bank credit or by issuing a bond which is directly sold to risk averse investors who also can hold safe deposits at the bank. We show that a monopolistic...
Persistent link: https://www.econbiz.de/10005627952
We ask whether offering a menu of unemployment insurance contracts is welfare improving in a heterogeneous population. We adopt a repeated moral-hazard framework as in Shavell/Weiss (1979) supplemented by unobserved heterogeneity about agents’ job opportunities. Our main theoretical...
Persistent link: https://www.econbiz.de/10005627970
We ask whether offering a menu of unemployment insurance contracts is welfare-improving in a heterogeneous population. We adopt a repeated moral hazard framework as in Shavell/Weiss (1979), supplemented by unobserved heterogeneity about agents’ job opportunities. Our main theoretical...
Persistent link: https://www.econbiz.de/10005627975
Health insurance is potentially subject to risk selection, i.e. adverse selection on the part of consumers and cream skimming on the part of insurers. Adverse selection models predict that competitive health insurers can eschew high-risk individuals by o¤ering contracts with low deductibles or...
Persistent link: https://www.econbiz.de/10005756592