In a differential information economy with quasi–linear utilities, monetary transfers facilitate the fulfillment of incentive compatibility constraints : the associated ex ante core is generically nonempty. However, we exhibit a well–behaved exchange economy in which this core is empty, even...

We study imperfect competition between insurers in a multiple-risk environment. In the absence of asymmetric information, equilibria are efficient, and we determine the degrees of specialization under which the specialized insurers are able or unable to capture the surplus. We show in contrast...

This paper presents a capital asset pricing model in the presence of asymmetric information and transaction costs. The model is a generalized version of Merton's (1987) model and Black's (1974) model. Empirical tests show a negative relation between the expected rate of return and the shadow...

We investigate a two-player zero-sum stochastic differential game in which the players have an asymmetric information on the random payoff. We prove that the game has a value and characterize this value in terms of dual viscosity solutions of some second order Hamilton-Jacobi equation.

In this paper we show that unlike in Bayesian frameworks asymmetric information does matter and can explain differences in common knowledge decisions due to ambiguous character of agents' private information. Agents share a common-but-not-necessarily-additive prior beliefs represented by...

We identify particular exchange economies with asymmetric information in which the ex ante incentive compatible core is nonempty provided that coalitions can allocate goods by means of random mechanisms. Both the use of random mechanisms and the restriction to a specific class of economies are...

This article models a situation in which a monopolistic insurer evaluates risk better than its customers. The resulting equilibrium allocations are compared to the consequences of the standard adverse selection hypothesis. On the positive side, they exhibit the property that low-risk people are...

In this paper, we extend Aumann’s (Ann Stat 4:1236–1239, 1976) probabilistic agreement theorem to situations in which agents’ prior beliefs are represented by a common neo-additive capacity. In particular, we characterize the family of updating rules for neo-additive capacities, which are...