Home

Randomization with Asymmetric Information

Joseph E. Stiglitz; Arnott Richard

Title:
Randomization with Asymmetric Information
Author(s):
Stiglitz, Joseph E.; Richard, Arnott
Date:
Type:
Articles
Department:
Business
Volume:
19
Permanent URL:
Book/Journal Title:
RAND Journal of Economics
Abstract:
It is by now well known that, in the presence of moral hazard or adverse selection, randomization of insurance premiums and benefits may be Pareto efficient. This article provides a typology of the various forms that randomization may take, derives necessary or sufficient conditions for the desirability of these various forms of randomization, obtains some single characterization theorems of the efficient random policies, gives some intuition behind the results, and considers why randomization appears to occur less often in practice than the theory suggests it should.
Subject(s):
Economics
Item views:
54
Metadata:
text | xml

In Partnership with the Center for Digital Research and Scholarship at Columbia University Libraries/Information Services | Terms of Use