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UID:5fad98645ddc388a090933f67cb73b56
CATEGORIES:Seminars
CREATED:20170418T174350
SUMMARY:Lunch Seminar: Ali Shourideh - Wharton School, University of Pennsylvania
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Efficiency and Adverse Selection: The Role of Mutual Contracts (joint with 
 V. V. Chari and Ariel Zetlin-Jones)\nAbstract:\n We study competitive equil
 ibria in economies with adverse selection. In our model, a large population
  of agents contracts with a finite set of firms. Firms compete over private
 ly informed agents by offering non-linear and endogenous contracts. These c
 ontracts are allowed to depend on the composition of agents that trade with
  one firm. In an insurance context, this is equivalent to mutualization of 
 insurance contracts whereby each insuree’s contract depends on the distribu
 tion of other insurees’ claims. Our main result is that when this notion of
  contracts are allowed, a competitive equilibrium always exists. Furthermor
 e, the competitive equilibrium is always constrained efficient (in the sens
 e of interim efficiency) and is unique. We show this result for a variety o
 f environments (the insurance market a la Rothschild and Stiglitz (1976), S
 pence’s signaling model, Bester’s loan market model, among others) and for 
 one-dimensional distributions of private information among agents. Our resu
 lt sheds light on optimal regulation of markets with adverse selection spec
 ially that of health insurance markets. It suggests that rather than using 
 traditional tools such as mandates and regulation of contract characteristi
 cs, government must monitor insurance companies and enforce the mutualizati
 on of contracts whereby firms share the losses and gains from claims with a
 ll the insurers.\n
DTSTAMP:20260407T105418Z
DTSTART:20160617T130000Z
DTEND:20160617T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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