Efficient Equilibria in Economies with Adverse Selection
نویسندگان
چکیده
In economies with Adverse Selection the existing Competitive Equilibrium concept ([10]) imply either that the equilibrium does not exist, or that it is not necessarily efficient. We introduce and analyze, within the Rotschild and Stiglitz model of Adverse Selection, a competitive notion of equilibrium, a constrained competitive equilibrium, which yields a unique and constrained efficient allocation. At a constrained equilibrium, individuals of different types are allowed to make transfers and, as in ([1] and [2]), joint trades must satisfy a market incentive ∗We thank Alberto Bennardo, Alberto Bisin, Alessandro Citanna and Piero Gottardi for long discussions in the past over this topic. †e-mail: [email protected]. The research was supported by the NSF grant NSF/SES-0136556 ‡e-mail: [email protected]
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