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- Title
COMPETITIVE POOLING: ROTHSCHILD-STIGLITZ RECONSIDERED.
- Authors
Dubey, Pradeep; Geanakoplos, John
- Abstract
We build a model of competitive pooling, which incorporates adverse selection and signaling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household's deliveries are the same at all pools. The RothschildStiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story in our perfectly competitive framework, their separating equilibrium always exists (even when they say it does not) and is unique.
- Subjects
COMPETITION; COMMERCE; ECONOMIC equilibrium; ECONOMICS; STATICS &; dynamics (Social sciences); HEADS of households; ADVERSE selection (Insurance); RISK management in business; FINANCE
- Publication
Quarterly Journal of Economics, 2002, Vol 117, Issue 4, p1529
- ISSN
0033-5533
- Publication type
Article
- DOI
10.1162/003355302320935098