A note on uniqueness in game-theoretic foundations of the reactive equilibrium

  • Riley (1979)'s reactive equilibrium concept addresses problems of equilibrium existence in competitive markets with adverse selection. The game-theoretic interpretation of the reactive equilibrium concept in Engers and Fernandez (1987) yields the Rothschild-Stiglitz (1976)/Riley (1979) allocation as an equilibrium allocation, however multiplicity of equilibrium emerges. In this note we imbed the reactive equilibrium's logic in a dynamic market context with active consumers. We show that the Riley/Rothschild-Stiglitz contracts constitute the unique equilibrium allocation in any pure strategy subgame perfect Nash equilibrium.

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Metadaten
Author:Wanda Mimra, Achim Wambach
URN:urn:nbn:de:hebis:30:3-353062
URL:http://ssrn.com/abstract=2515395
DOI:https://doi.org/10.2139/ssrn.2515395
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 483
Series (Serial Number):CFS working paper series (483)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/11/03
Tag:asymmetric information; competitive insurance market; contract addition; reactive equilibrium
Issue:September 2014
Page Number:14
HeBIS-PPN:351158731
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht