A note on uniqueness in game-theoretic foundations of the reactive equilibrium

Arbeitspapier

Riley (1979)'s reactive equilibrium concept addresses problems of equilibrium existence in competitive markets with adverse selection. The game-theoretic interpretation of the reactive equilibrium concept in Engers and Fernandez (1987) yields the Rothschild-Stiglitz (1976)/Riley (1979) allocation as an equilibrium allocation, however multiplicity of equilibrium emerges. In this note we imbed the reactive equilibrium's logic in a dynamic market context with active consumers. We show that the Riley/Rothschild-Stiglitz contracts constitute the unique equilibrium allocation in any pure strategy subgame perfect Nash equilibrium.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 483

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Asymmetric and Private Information; Mechanism Design ; Insurance; Insurance Companies; Actuarial Studies ; Market Structure, Firm Strategy, and Market Performance: General
• Subject: asymmetric information ; competitive insurance market ; contract addition ; reactive equilibrium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mimra, Wanda ; Wambach, Achim
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2014

Further information

• DOI: doi:10.2139/ssrn.2515395
• Handle: http://hdl.handle.net/10419/103461
• URN: urn:nbn:de:hebis:30:3-353062
• Last update: 10.03.2025, 11:42 AM CET