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Title:A game-theoretic foundation for the Wilson equilibrium in competitive insurance markets with adverse selection PDF Logo
Authors:Mimra, Wanda
Wambach, Achim
Issue Date:2011
Series/Report no.:CESifo working paper: Industrial Organisation 3412
Abstract:We extend the seminal Rothschild and Stiglitz (1976) model on competitive insurance markets with asymmetric information in the spirit of Wilson (1977)'s 'anticipatory equilibrium' by introducing an additional stage in which initial contracts can be withdrawn after observation of competitors' contract offers. We show that an equilibrium always exists where consumers obtain their respective Wilson-Miyazaki-Spence (WMS) contract. Jointly profit-making contracts can also be sustained as equilibrium contracts. However, the secondbest efficient WMS allocation is the unique equilibrium allocation under entry.
Subjects:casymmetric information
competitive insurance market
contract withdrawal
JEL:G15
F36
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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