Abstract
Economic theorists traditionally banish discussions of information to footnotes. Serious consideration of costs of communication, imperfect knowledge, and the like would, it is believed, complicate without informing. This paper, which analyzes competitive markets in which the characteristics of the commodities exchanged are not fully known to at least one of the parties to the transaction, suggests that this comforting myth is false. Some of the most important conclusions of economic theory are not robust to considerations of imperfect information.
This work was supported by National Science Foundation Grants SOC 74-22182 at the Institute for Mathematical Studies in the Social Sciences, Stanford University and SOC 73-05510 at Princeton University. The authors are indebted to Steve Salop, Frank Hahn, and Charles Wilson for helpful comments, and to the participants in the seminars at the several universities at which these ideas were presented.
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Rothschild, M., Stiglitz, J. (1976). Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information. In: Dionne, G., Harrington, S.E. (eds) Foundations of Insurance Economics. Huebner International Series on Risk, Insurance and Economic Security, vol 14. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-7957-5_18
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DOI: https://doi.org/10.1007/978-94-015-7957-5_18
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