This paper revisits the problem of adverse selection in the insurance market of Rothschild and Stiglitz (1976). We propose a simple extension of the game-theoretic structure in Hellwig (1987) under which Nash-type strategic interaction between the informed customers and the uninformed firms...

This paper revisits the problem of adverse selection in the insurance market of Rothschild and Stiglitz (QJE, 1976). We propose a simple extension of the game-theoretic structure in Hellwig (EER, 1987) under which Nash-type strategic interaction between the informed customers and the uninformed...

Is there a rational component in the decision to commit suicide? Economists have been trying to shed light on this question by studying whether suicide rates are related to contemporaneous conditions. This paper goes one step further: we test whether suicides are linked to forward-looking...

The financial crisis of 2007-08 has underscored the importance of adverse selection in financial markets. This friction has been mostly neglected by macroeconomic models of financial frictions, however, which have focused almost exclusively on the effects of limited pledgeability. In this paper,...

We propose a parsimonious model with adverse selection where delinquency, renegotiation, and bankruptcy all occur in equilibrium as a result of a simple screening mechanism. A borrower has private information about her cost of bankruptcy, and a lender may use random contracts to screen different...

Are suicides rational? At least since the 70's economists have been trying to shed light on this question by studying whether suicide rates are related to contemporaneous economic conditions. This paper goes one step further: we test whether suicides are linked to forward-looking behavior. In...

This paper presents a theory in which risk-averse heterogeneously talented entrepreneurs are the key agents driving the process of development and modernisation. Entrepreneurial skills are private information, which prevents full risk sharing. In that setup, development to a modern industrial...

A decision maker is characterized by two binary relations. The first reflects decisions that are rational in an “objective” sense: the decision maker can convince others that she is right in making them. The second relation models decisions that are rational in a “subjective” sense: the...