The efficiency of competitive equilibria in insurance markets with asymmetric information

Keith John Crocker, Arthur Snow

Research output: Contribution to journalArticlepeer-review

85 Scopus citations

Abstract

This paper addresses the relationship between competitive equilibria and efficient allocations in an insurance market with asymmetric information. Using the definition of second-best efficiency proposed by Harris and Townsend (1981) for environments characterized by informational assmmetry, the efficiency properties of several proposed market equilibria are examined. We find an analogue to the First Optimality Theorem: A Miyazaki-Wilson equilibrium always results in a second best allocation.

Original languageEnglish (US)
Pages (from-to)207-219
Number of pages13
JournalJournal of Public Economics
Volume26
Issue number2
DOIs
StatePublished - Jan 1 1985

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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