Coalition-Proof Allocations in Adverse-Selection Economies (original) (raw)

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Abstract

We reexamine the canonical adverse selection insurance economy first studied by Rothschild and Stiglitz [1976]. We define blocking in a way that takes private information into account and define a coalition-proof correspondence as a mapping from coalitions to allocations with the property that allocations are in the correspondence, if and only if, they are not blocked by any other allocations in the correspondence for any subcoalition. We prove that the _Miyazaki allocation_—the Pareto-optimal allocation (possibly cross-subsidized) most preferred by low-risk agents—is coalition-proof.

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1. Research Department, Federal Reserve Bank of Richmond, Richmond, 23261, VA
   Jeffrey M. Lacker & John A. Weinberg

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1. Jeffrey M. Lacker
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2. John A. Weinberg
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Lacker, J., Weinberg, J. Coalition-Proof Allocations in Adverse-Selection Economies.Geneva Risk Insur Rev 24, 5–17 (1999). https://doi.org/10.1023/A:1008762430952

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• Published: 01 June 1999
• Issue Date: 01 June 1999
• DOI: https://doi.org/10.1023/A:1008762430952

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