@techreport{vonSiemens2009Negative,
abstract = {Rothschild and Stiglitz (1976) show that there need not exist a competitive equilibrium in markets with adverse selection. Building on their framework we demonstrate that externalities between agents - an agent's utility upon accepting a contract depends on the average type attracted by the respective principal - can solve the equilibrium existence problem, even when the size of the externalities is arbitrarily small. Our result highlights the degree of control a principal has over the attractiveness of his contracts as an important feature for equilibrium existence, thereby offering a new perspective on existing theories of competition in markets with adverse selection.},
address = {Bonn},
author = {Ferdinand von Siemens and Michael Kosfeld},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {D82; D86; 330; Asymmetric information; competition; adverse selection; externality; Marktmechanismus; Wettbewerb; Asymmetrische Information; Adverse Selection; Externer Effekt; Versicherungs\"{o}konomik; Theorie},
language = {eng},
note = {urn:nbn:de:101:1-20090513220},
number = {4125},
publisher = {IZA},
title = {Negative externalities and equilibrium existence in competitive markets with adverse selection},
type = {IZA discussion papers},
url = {http://hdl.handle.net/10419/35822},
year = {2009}
}
