Competitive Insurance Markets under Adverse Selection and Capacity Constraints
نویسندگان
چکیده
Ever since the seminal work by Rothschild and Stiglitz (1976) on competitive insurance markets under adverse selection the equilibrium-non-existence problem has been one of the major puzzles in insurance economics. We extend the original analysis by considering firms which face capacity constraints, which might be due to limited capital. We show that under mild assumptions a pure strategy equilibrium exists, where every consumer buys his appropriate Rothschild-Stiglitz contract. JEL classification: C72, C78, D82, G22
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