Open Access. Powered by Scholars. Published by Universities.®
Social and Behavioral Sciences Commons™
Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 4 of 4
Full-Text Articles in Social and Behavioral Sciences
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household’s deliveries are the same at all pools. The Rothschild-Stiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story into our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn’t) and is unique.
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household’s deliveries are the same at all pools. The Rothschild-Stiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story into our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn’t) and is unique.
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household’s deliveries are the same at all pools. The Rothschild-Stiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story in our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn’t) and is unique.
Insurance Contracts Designed By Competitive Pooling, Pradeep Dubey, John Geanakoplos
Insurance Contracts Designed By Competitive Pooling, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a model of competitive pooling and show how insurance contracts emerge in equilibrium, designed by the invisible hand of perfect competition. When pools are exclusive, we obtain a unique separating equilibrium. When pools are not exclusive but seniority is recognized, we obtain a different unique equilibrium: the pivotal primary-secondary equilibrium. Here reliable and unreliable households take out a common primary insurance up to its maximum limit, and then unreliable households take out further secondary insurance.