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The existence of the Miyazaki-Wilson-Spence equilibrium with continuous type distributions

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  • Gemmo, Irina
  • Kubitza, Christian
  • Rothschild, Casey G.

Abstract

We prove the existence of an equilibrium in competitive markets with adverse selection in the sense of Miyazaki (1977), Wilson (1977), and Spence (1978) when the distribution of unobservable risk types is continuous. Our proof leverages the finite-type proof in Spence (1978) and a limiting argument akin to Hellwig (2007)'s study of optimal taxation.

Suggested Citation

  • Gemmo, Irina & Kubitza, Christian & Rothschild, Casey G., 2018. "The existence of the Miyazaki-Wilson-Spence equilibrium with continuous type distributions," ICIR Working Paper Series 32/18, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    • Handle: RePEc:zbw:icirwp:3218
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    References listed on IDEAS

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    More about this item

    Keywords

    asymmetric and private information; insurance market; adverse selection; equilibrium;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition

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