A game-theoretic foundation for the Wilson equilibrium in competitive insurance markets with adverse selection

Arbeitspapier

We extend the seminal Rothschild and Stiglitz (1976) model on competitive insurance markets with asymmetric information in the spirit of Wilson (1977)'s 'anticipatory equilibrium' by introducing an additional stage in which initial contracts can be withdrawn after observation of competitors' contract offers. We show that an equilibrium always exists where consumers obtain their respective Wilson-Miyazaki-Spence (WMS) contract. Jointly profit-making contracts can also be sustained as equilibrium contracts. However, the secondbest efficient WMS allocation is the unique equilibrium allocation under entry.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3412

Classification and Topics

• Classification: Wirtschaft ; International Financial Markets ; Financial Aspects of Economic Integration
• Subject: casymmetric information ; competitive insurance market ; contract withdrawal ; Versicherungsökonomik ; Spieltheorie ; Asymmetrische Information ; Adverse Selection ; Vertrag ; Gleichgewicht ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mimra, Wanda ; Wambach, Achim
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/46552
• Last update: 10.03.2025, 11:43 AM CET