There is a general presumption that competition is a good thing. In this paper we show that competition in the insurance markets can be bad and that adverse selection is in general worse under competition than under monopoly. The reason is that monopoly can exploit its market power to relax...

We analyze a monopolistic model of quality uncertainty but with the possibility of information acquisition on the consumer side. Information is costly and its amount is chosen by the consumer. The analysis of Bayesian equilibria shows the possibility of three equilibrium classes, only one of...

This work takes a closer look on the predominant assumption in usual lemon market models of having finitely many or even only two different levels of quality. We model a situation which is close to the classical monopolistic setting but admits an interval of possible quality values....

Asymmetric information can lead to adverse selection and market failure. In a dynamic setting, asymmetric information also limits reclassification risk. This certainty offsets the costs of adverse selection. Using a dynamic model of endogenous insurance choice and price calibrated to the U.S....

We study the impacts of the recently proposed risk retention regulation for asset securitization, i.e. the issuer has to retain a certain proportion of securitized assets. We also consider the frequently discussed measure to require the issuer disclose certain information of the securitized...

A seller of a divisible good faces several identical buyers. The quality of the good may be low or high, and is the seller's private information. The seller has strictly convex preferences that satisfy a single-crossing property. Buyers compete by posting menus of nonexclusive contracts, so that...

This paper examines asymmetric information in the life insurance market using data that link life insurance holdings with death records for a representative sample of purchasers. This analysis finds no compelling evidence for adverse selection in a broad age cohort.

We develop a model in which competition in the labor market may produce worker-firm matches that are inferior to those obtained in the absence of competition. This result contrasts with the conventional wisdom that competition among employers allocates scarce talent efficiently. In a model in...

In this paper I consider a repeated buyer-seller relationship wherein a seller has private information on his fixed cost parameter. Once a buyer pays for the good - but before its delivery - he may fear opportunistic behavior by the seller; the latter may prefer not to produce, in which case he...

This paper studies markets plagued with asymmetric information on the quality of traded goods. In Akerlof's setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse selection problem: The market...