Refinements and incentive efficiency in Walrasian models of insurance economies

Alessandro Citanna, Paolo Siconolfi

Research output: Contribution to journalArticlepeer-review

Abstract

The literature on Walrasian markets in large economies with adverse selection has used various equilibrium refinements, but has obtained no general incentive efficiency of equilibrium, namely when cross-subsidies are needed for efficiency. We show that the same refined equilibria may also be incentive inefficient even when general mechanisms that allow for such cross-subsidies are priced and can be traded. In the process, we also prove existence of some type of forward induction equilibria in this context.

Original languageEnglish (US)
Pages (from-to)208-218
Number of pages11
JournalJournal of Mathematical Economics
Volume50
Issue number1
DOIs
StatePublished - Jan 2014

Keywords

  • Adverse selection
  • Mechanisms
  • Refinements
  • Walrasian markets

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

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