Latent Policies: An Extended Example
Arnott and Stiglitz (1993) have argued that, in competitive insurance markets with moral hazard, equilibrium may entail firms offering latent policies--policies that are not bought in equilibrium but are kept in place to deter entry. This paper provides an extended example of such an equilibrium, which not only proces that latent policies can be present in equilibrium but also elucidates the mechanism which makes them potentially effective in deterring entry.
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- Richard Arnott & Joseph Stiglitz, 1993.
"Price Equilibrium, Efficiency, And Decentralizability In Insurance Markets With Moral Hazard,"
Boston College Working Papers in Economics
254, Boston College Department of Economics.
- Arnott, R. & Stiglitz, J., 1994. "Price Equilibrium, Efficiency, and Decentralizability in Insurance Markets with Moral Hazard," Papers 05, Laval - Laboratoire Econometrie.
- Helpman, Elhanan & Laffont, Jean-Jacques, 1975. "On moral hazard in general equilibrium theory," Journal of Economic Theory, Elsevier, vol. 10(1), pages 8-23, February.
- Richard J. Arnott & Joseph E. Stiglitz, 1988.
"The Basic Analytics of Moral Hazard,"
NBER Working Papers
2484, National Bureau of Economic Research, Inc.
- Bizer, David S & DeMarzo, Peter M, 1992. "Sequential Banking," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 41-61, February.
- Kahn, Charles M. & Mookherjee, Dilip, 1995. "Market failure with moral hazard and side trading," Journal of Public Economics, Elsevier, vol. 58(2), pages 159-184, October.
- Richard Arnott & Joseph Stiglitz, 1991. "Equilibrium in Competitive Insurance Markets with Moral Hazard," NBER Working Papers 3588, National Bureau of Economic Research, Inc.
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