Efficiency of competition in insurance markets with adverse selection

摘要: There is a general presumption that competition good thing. In this paper we show in the insurance markets can be bad when there adverse selection. Using dual theory of choice under risk, are able to fully characterize both competitive and monopoly market outcomes. When two types dominates if only leads unravelling. continuum efficiency less trivial. effect shown provide better but at cost driving out some agents from market. Performing simulation for different distributions find performs (much) than terms realization gains trade across all traders equilibrium. The reason monopolist exploit its power relax incentive constraints.