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...

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,...

A seller dynamically sells a divisible good to a buyer. It is common knowledge that there are gains from trade and that the gains per unit are decreasing. Payoffs are interdependent as in Akerlof's market for lemons. The seller is informed about the good's quality. The buyer makes an offer in...

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...

This paper investigates the effect of potential competition on takeovers which we model as a bargaining game with alternating offers where calling an auction represents an outside option for each bidder at each stage of the game. The model aims to answer three main questions: who wins the...

We model a situation in which two countries are involved in a dispute. The dispute can end in a peaceful settlement, or it can escalate to war. If it is common knowledge that the countries are strategically rational, then the only equilibrium outcome of the model is peace. If, on the other hand,...

We examine the buyer-seller problem under different levels of commitment. The seller is informed of the quality of the good, which affects both his cost and the buyer's valuation, but the buyer is not. We characterize the allocations that can be achieved through mechanisms in which, unlike with...

We present a theoretical model of the provision of a durable public good over an infinite horizon. In each period, there is a societal endowment of which each of n districts owns a share. This endowment can either be invested in the public good or consumed. We characterize the planner's optimal...