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Characterization, Existence, and Pareto Optimality in Insurance Markets with Asymmetric Information with Endogenous and Asymmetric Disclosures : Revisiting Rothschild-Stiglitz

Stiglitz, Joseph E. - 2018

We study the Rothschild-Stiglitz model of competitive insurance markets with endogenous information disclosure by both firms and consumers. We show that an equilibrium always exists, (even without the single crossing property), and characterize the unique equilibrium allocation. With two types...

Persistent link: https://www.econbiz.de/10012453009

Preference Heterogeneity and Insurance Markets : Explaining a Puzzle of Insurance

Cutler, David M. - 2008

Standard theories of insurance, dating from Rothschild and Stiglitz (1976), stress the role of adverse selection in explaining the decision to purchase insurance. In these models, higher risk people buy full or near-full insurance, while lower risk people buy less complete coverage, if they buy...

Persistent link: https://www.econbiz.de/10012464902

Home Equity Insurance

Shiller, Robert J. - 1994

Home equity insurance policies, policies insuring homeowners against declines in the price of their homes, would bear some resemblance both to ordinary insurance and to financial hedging vehicles. A menu of choices for the design of such policies is presented here, and conceptual issues are...

Persistent link: https://www.econbiz.de/10012474085

Capital Accumulation and Uncertain Lifetimes with Adverse Selection

Abel, Andrew B. - 1985

This paper examines the implications of adverse selection in the private annuity market for the pricing of private annuities and the consequent effects on constrption and bequest behavior. With privately known heterogeneous mortality probabilities, adverse selection causes the rate of return on...

Persistent link: https://www.econbiz.de/10012477416

Imperfect Competition in Selection Markets

Mahoney, Neale - 2014

Standard policies to correct market power and selection can be misguided when these two forces co-exist. Using a calibrated model of employer-sponsored health insurance, we show that the risk adjustment commonly used by employers to offset adverse selection often reduces the amount of...

Persistent link: https://www.econbiz.de/10012458255

Deriving Risk Adjustment Payment Weights to Maximize Efficiency of Health Insurance Markets

Layton, Timothy J. - 2016

Risk adjustment of payments to health plans is fundamental to regulated competition among private insurers, which serves as the basis of national health policy in many countries. To date, estimation and evaluation of a risk adjustment model has been a two-step process. In a first step, the...

Persistent link: https://www.econbiz.de/10012456038

An Empirical Examination of Information Barriers to Trade in Insurance

Cawley, John - 1996

This paper tests restrictions implied by the canonical theory of insurance under asymmetric information using ideal … life insurance. We report several findings which are hard to reconcile with the canonical theory. First, we find a striking …-linear pricing than predicted by theory: the theory predicts that prices rise with quantity, but we find that they fall. Third, we …

Persistent link: https://www.econbiz.de/10012473173

Migration and Informal Insurance

Meghir, Costas - 2019

Do new migration opportunities for rural households change the nature and extent of informal risk sharing? We experimentally document that randomly offering poor rural households subsidies to migrate leads to a 40% improvement in risk sharing in their villages. We explain this finding using a...

Persistent link: https://www.econbiz.de/10012480029

Repurchase Options in the Market for Lemons

Bigio, Saki - 2020

We study repurchase options (repo contracts) in a competitive asset market with asymmetric information. Gains from trade emerge from a liquidity need, but private information about asset quality prevents the full realization of trade. We obtain a unique equilibrium, which features a pooling repo...

Persistent link: https://www.econbiz.de/10012481280

Composition of Capital Flows : A Survey

Kirabaeva, Koralai - 2010

We survey several mechanisms that explain the composition of international capital flows: foreign direct investment, foreign portfolio investment and debt flows (bank loans and bonds). We focus on information frictions such as adverse selection and moral hazard, and exposure to liquidity shocks,...

Persistent link: https://www.econbiz.de/10012462165

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