Randomization with Asymmetric Information a Simplified Exposition

A series of recent papers investigated the desirability of randomization of insurance contracts in the presence of moral hazard. All treat a continuum of possible outcomes, which tends to obscure the intuition. In this paper, we treat the two-outcome case, employing derivations which highlight the intuition. We also discuss randomization with adverse selection.

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Year of publication:	1985
Authors:	Arnott, Richard ; Stiglitz, Joseph E.
Institutions:	Economics Department, Queen's University

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Series:	Working Papers.
Type of publication:	Book / Working Paper
Notes:	15 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005653248