1976 Articles

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

Stiglitz, Joseph E.; Rothschild, Michael

This article discusses the equilibrium in competitive insurance markets. Analyzes competitive markets in which the characteristics of the commodities exchange are not fully known to at least one of the parties to the transaction. It also determines the importance conclusions of economic theory are not robust to considerations of imperfect information. Describes the supply and demand functions of the participants in the market. Determining individual demand for insurance contracts is straightforward.