Loading…
Competitive Equilibria with Asymmetric Information
This paper studies competitive equilibria in economies where agents trade in markets for standardized, non-exclusive financial contracts, under conditions of asymmetric information (both of the moral hazard and the adverse selection type). The problems for the existence of competitive equilibria in...
Saved in:
Published in: | Journal of economic theory 1999-07, Vol.87 (1), p.1-48 |
---|---|
Main Authors: | , |
Format: | Article |
Language: | English |
Subjects: | |
Citations: | Items that this one cites Items that cite this one |
Online Access: | Get full text |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
Summary: | This paper studies competitive equilibria in economies where agents trade in markets for standardized, non-exclusive financial contracts, under conditions of asymmetric information (both of the moral hazard and the adverse selection type). The problems for the existence of competitive equilibria in this framework are identified, and shown to be essentially the same under different forms of asymmetric information. We then show that a “minimal” form of non-linearity of prices (a bid-ask spread, requiring only the possibility to separate buyers and sellers), and the condition that the aggregate return on the individual positions in each contract can be perfectly hedged in the existing markets, ensure the existence of competitive equilibria in the case of both adverse selection and moral hazard. Journal of Economic Literature Classification Numbers: D50, D82. |
---|---|
ISSN: | 0022-0531 1095-7235 |
DOI: | 10.1006/jeth.1999.2514 |