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Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information

Joseph E. Stiglitz; Michael Rothschild

Title:
Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information
Author(s):
Stiglitz, Joseph E.
Rothschild, Michael
Date:
Type:
Articles
Department:
Business
Volume:
90
Permanent URL:
Book/Journal Title:
Quarterly Journal of Economics
Abstract:
This paper analyzes competitive markets in which the characteristics of the commodities exchanged are not fully known to at least one of the parties to the transaction and suggests that the comforting myth that serious consideration of costs of communication, imperfect knowledge, and the like complicate without informing is false. Some of the most important conclusions of economic theory are not robust to considerations of imperfect information. We are able to show that not only may a competitive equilibrium not exist, but when equilibria do exist, they may have strange properties.
Subject(s):
Economics
Publisher DOI:
10.2307/1885326
Item views:
192
Metadata:
text | xml

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