(Neutrally) Optimal Mechanism under Adverse Selection: The canonical insurance problem

• 成果类型: Article
• 署名作者: Diasakos, Theodoros M.; Koufopoulos, Kostas
• 署名单位: University of Stirling; University of Leicester
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2018.04.007
• 发表日期: 2018
• 页码: 159-186
• 关键词: Insurance market; adverse selection; Interim incentive efficiency; Neutral optimum

摘要

This paper revisits the problem of adverse selection in the insurance market of Rothschild and Stiglitz (1976). We extend the three-stage game in Hellwig (1987) by allowing firms to endogenously choose whether or not to pre-commit on their contractual offers (menus). We show how this mechanism can deliver the Miyazaki-Wilson-Spence allocation as the unique perfect-Bayesian equilibrium. This allocation is the unique incentive-efficient and individually-rational maximizer of the utility of the most profitable type. In fact, given that the informed player has only two types, it is the unique core allocation and thus the unique neutral optimum in the sense of Myerson (1983). (C) 2018 Elsevier Inc. All rights reserved.