Extraction of surplus under adverse selection: the case of insurance markets
Article Abstract:
The extraction of surplus in the insurance market is evaluated using a principal-agent setting with two risk averse agents with different information distributions. The full surplus extraction is dependent the degree of risk and liability of the agents. The possibility of agents incurring unlimited liability is also applicable to other diverse markets. The approach is complimentary to a model by Cremer and McLean which assumed a correlation between risk neutrality and interdependence.
Publication Name: Journal of Economic Theory
Subject: Economics
ISSN: 0022-0531
Year: 1996
User Contributions:
Comment about this article or add new information about this topic:
Endogenous determination of the degree of market-incompleteness in futures innovation
Article Abstract:
The determination of the number of futures contracts that an exchange creates is analyzed. The number of contracts that exchanges are willing to create could have an upper bound if differential information is available to investors, even if exchanges can create futures contracts without incurring any costs. The types of contracts in a stylized economy are examined together with the number of contracts that exchanges are willing to create.
Publication Name: Journal of Economic Theory
Subject: Economics
ISSN: 0022-0531
Year: 1995
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: Transaction costs, mistakes, and performance: assessing the importance of governance. part 2 Nontransactional data in managerial economics and marketing
- Abstracts: Rat race redux: adverse selection in the determination of work hours in law firms. Is there a winner's curse in the labor market?
- Abstracts: Periodicity versus chaos in the dynamics of cobweb models. Non-linear structure of a Metzlerian inventory cycle model
- Abstracts: Factor-intensity reversals under monopolistic competition. Technical differences and inter-industry trade in the Nordic countries
- Abstracts: Competitive vertical foreclosure. Full or partial market coverage? A note on spatial competition with elastic demand