Optimal Contract Regulation in Selection Markets by Andre Veiga

Join us for another event in the Microeconomics Research Seminar Series, Summer Term 2023.

Join Andre Veiga from the Business School, Imperial College London, who will present their research on Optimal Contract Regulation in Selection Markets.

Abstract

We develop a tractable model of competitive insurance markets with a continuum of types and exogenous restrictions on the set of allowed contracts. Our model nests, as special cases, the market for lemons of Akerlof (1970) and the unrestricted contracts setting of Rothschild and Stiglitz (1976).

We allow purchase to be mandatory or voluntary. Equilibrium generically exhibits partial pooling and therefore depends non-trivially on the type distribution. An increase in the maximal allowed coverage always increases welfare. Increases in the minimal allowed coverage have ambiguous (and possibly non-monotonic) effects on welfare. In markets for lemons, if the first best is not an equilibrium, then the socially optimal level of mandated coverage is interior (i.e, below full insurance).

This seminar will be held in the Economics Common Room on Monday 5 June 2023 at 2.00pm. This event is open to all levels of study and is also open to the public.

To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Microeconomics Research Seminar Series.