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Equilibrium with Mutual Organizations in Adverse Selection Economies

Author

Listed:
  • Adam Blandin
  • John H. Boyd
  • Edward C. Prescott

Abstract

An equilibrium concept in the Debreu (1954) theory-of-value tradition is developed for a class of adverse selection economies and applied to the Spence signaling and Rothschild-Stiglitz (1976) adverse selection environments. The equilibrium exists and is optimal. Further, all equilibria have the same individual type utility vector. The economies are large with a finite number of types that maximize expected utility on an underlying commodity space. An implication of the analysis is that the invisible hand works for this class of adverse selection economies.

Suggested Citation

  • Adam Blandin & John H. Boyd & Edward C. Prescott, 2015. "Equilibrium with Mutual Organizations in Adverse Selection Economies," Working Papers 717, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmwp:717
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    Cited by:

    1. Wanda Mimra & Achim Wambach, 2019. "Contract withdrawals and equilibrium in competitive markets with adverse selection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(4), pages 875-907, June.
    2. Edward C. Prescott, 2016. "Northern America’s Production of Technology Capital Is Transforming the World Economy," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 51(3), pages 127-132, July.

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    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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