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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...
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giving more to all entrepreneurs. In equilibrium, competition for the best entrepreneurs forces intermediaries to offer …. Competition among financial intermediaries always forces them to fund projects with negative expected returns both from a private … scale. The three main features of our framework (competition, adverse selection, and limited liability) are necessary to get …
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I provide an equilibrium analysis of “selection markets”: where consumers not only vary in how much they are willing to pay, but also in how much they cost to the seller. The model provides a joint explanation for three empirical phenomena: low uptake of existing products, slow demand for...
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We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous time setting with hidden information about stochastic operating profits, we show that a revenue-maximizing government can optimally...
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