SFB 303 Discussion Paper No. A - 056

Author: Hellwig, Martin F.
Title: A Note on the Specification of Inter-Firm Communication in Insurance Markets with Adverse Selection
Abstract: The paper reconsiders the proposition, due to Jaynes, that the Rothschild-Stiglitz-Wilson insurance market with adverse selection has a Nash equilibrium once the sharing of information about customers is treated endogenously as part of the game among firms. The proposition is shown to be correct if and only if each firm`s communication behaviour is conditioned on the set of contracts that are offered the other firms. This type of conditioning introduces a reactive element which is akin to the alternative approach of Wilson.
Creation-Date: September 1986
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