This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

General Equilibrium with Asymmetric Information: A Dual Approach

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Belen Jerez (Universidad Autonoma de Barcelona)

Additional information is available for the following registered author(s):

Abstract

We study markets where the characteristics or decisions of certain agents are relevant but not known to their trading partners. Assuming exclusive transactions, the environment is described as a continuum economy with indivisible commodities. We characterize incentive constrained efficient allocations as solutions to linear programming problems and appeal to duality theory to demonstrate the generic existence of external effects in these markets. Because under certain conditions such effects may generate non-convexities, randomization emerges as a theoretic possibility. In characterizing market equilibria we show that, consistently with the personalized nature of transactions, prices are generally non-linear in the underlying consumption. On the other hand, external effects may have critical implications for market efficiency. With adverse selection, in fact, cross-subsidization across agents with different private information may be necessary for optimality, and so, the market need not even achieve an incentive constrained efficient allocation. In contrast, in the case of a single (type of) commodity, we find that when informational asymmetries arise after the trading period (e.g. moral hazard; ex post hidden types) external effects are fully internalized at a market equilibrium.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://fmwww.bc.edu/RePEc/es2000/1497.pdf
File Format: application/pdf
File Function: main text
Download Restriction: no

Publisher Info
Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1497.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 01 Aug 2000
Date of revision:
Handle: RePEc:ecm:wc2000:1497

Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Email:
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December. [Downloadable!] (restricted)
  2. Mas-Colell, Andreu, 1975. "A model of equilibrium with differentiated commodities," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 263-295. [Downloadable!] (restricted)
  3. Bisin, Alberto & Gottardi, Piero, 1999. "Competitive Equilibria with Asymmetric Information," Journal of Economic Theory, Elsevier, vol. 87(1), pages 1-48, July. [Downloadable!] (restricted)
    Other versions:
  4. Makowski, Louis, 1979. "Value theory with personalized trading," Journal of Economic Theory, Elsevier, vol. 20(2), pages 194-212, April. [Downloadable!] (restricted)
  5. Gale, Douglas, 1996. "Equilibria and Pareto Optima of Markets with Adverse Selection," Economic Theory, Springer, vol. 7(2), pages 207-35, February.
    Other versions:
  6. Arnott, Richard & Greenwald, Bruce & Stiglitz, Joseph E., 1994. "Information and economic efficiency," Information Economics and Policy, Elsevier, vol. 6(1), pages 77-82, March. [Downloadable!] (restricted)
    Other versions:
  7. Prescott, Edward C & Townsend, Robert M, 1984. "General Competitive Analysis in an Economy with Private Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 1-20, February. [Downloadable!] (restricted)
  8. Garratt, Rod & Keister, Todd & Qin, Cheng-Zhong & Shell, Karl, 2002. "Equilibrium Prices When the Sunspot Variable Is Continuous," Journal of Economic Theory, Elsevier, vol. 107(1), pages 11-38, November. [Downloadable!] (restricted)
  9. Richard J. Arnott & Joseph E. Stiglitz, 1988. "Randomization with Asymmetric Information," NBER Working Papers 2507, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  11. Bisin, Alberto & Gottardi, Piero, 1997. "General Competitive Analysis with Asymmetric Information," Working Papers 97-38, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
    Other versions:
  12. Greenwald, Bruce C & Stiglitz, Joseph E, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 229-64, May. [Downloadable!] (restricted)
  13. Shell, Karl & Wright, Randall, 1993. "Indivisibilities, Lotteries, and Sunspot Equilibria," Economic Theory, Springer, vol. 3(1), pages 1-17, January.
    Other versions:
  14. Sun, Yeneng, 1998. "A theory of hyperfinite processes: the complete removal of individual uncertainty via exact LLN1," Journal of Mathematical Economics, Elsevier, vol. 29(4), pages 419-503, May. [Downloadable!] (restricted)
  15. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  16. Douglas Gale, 1996. "Equilibria and Pareto optima of markets with adverse selection (*)," Economic Theory, Springer, vol. 7(2), pages 207-235.
  17. Prescott, Edward C & Townsend, Robert M, 1984. "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, Econometric Society, vol. 52(1), pages 21-45, January. [Downloadable!] (restricted)
  18. Michael Magill, 2000. "Equity, Options and Efficiency in the Presence of Moral Hazard," Econometric Society World Congress 2000 Contributed Papers 1845, Econometric Society. [Downloadable!]
  19. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
  20. Manelli, Alejandro M & Vincent, Daniel R, 1995. "Optimal Procurement Mechanisms," Econometrica, Econometric Society, vol. 63(3), pages 591-620, May. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Belen Jerez, 2005. "Incentive Compatibility and Pricing under Moral Hazard," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 28-47, January. [Downloadable!] (restricted)
    Other versions:
  2. Alberto Bisin & Piero Gottardi, 2005. "Efficient Competitive Equilibria with Adverse Selection," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Alberto Bisin & Piero Gottardi, 2000. "Decentralizing Incentive Efficient Allocations of Economies with Adverse Selection," Econometric Society World Congress 2000 Contributed Papers 0855, Econometric Society. [Downloadable!]
Statistics
Access and download statistics

Did you know? Over 800 institutions contribute their bibliographic data directly to this service.

This page was last updated on 2008-7-16.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.