An example of non-existence of Riley equilibrium in markets with adverse selection

Azevedo, Eduardo M. and Gottlieb, Daniel ORCID: 0000-0002-0555-6185 (2019) An example of non-existence of Riley equilibrium in markets with adverse selection. Games and Economic Behavior, 116. 152 - 157. ISSN 0899-8256

Text (An Example of Non-Existence of Riley Equilibrium in Markets with Adverse Selection) - Accepted Version Download (540kB)

Abstract

Rothschild and Stiglitz [1976] proposed a model of a competitive market with adverse selection and showed that a (pure strategy) Nash equilibrium may not exist. Among the solutions proposed to deal with this problem, a particularly influential one is the notion of Riley (or reactive) equilibrium [Riley, 1979]. We give an example that shows that a Riley equilibrium may not exist if consumers are not ordered.

Item Type:	Article
Official URL:	https://www.sciencedirect.com/journal/games-and-ec...
Additional Information:	© 2019 Elsevier Inc
Divisions:	Management
Subjects:	H Social Sciences > HB Economic Theory Q Science > QA Mathematics
JEL classification:	D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
Date Deposited:	18 Nov 2019 17:30
Last Modified:	01 Nov 2024 05:33
URI:	http://eprints.lse.ac.uk/id/eprint/102566

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