组织的经济学与管理学（英文）ch07 Hidden characteristics problem.ppt

Chapter 7 Hidden characteristics problem George Hendrikse Figure III: Positioning of Part III Welfare theorem Anonymity Law of demand and supply Complete set of markets Law of one price Keywords Ex ante information asymmetry Adverse selection Self-selection Signaling Screening Incentives Two hidden characteristics problems Adverse selection Misrepresentation Example: Dental insurance Suppose that an insurance company has done research regarding the average family dental outlays. Each family knows the quality of the teeth of the various family members, while the insurance company is less informed. There are 5 types of families A naive insurance company asks an insurance premium of 700. Average profit per family: 700 - 600 = 100. Behaviour of families Families with dental outlays of 600 or less will not buy insurance. Families with dental outlays of 800 or more will buy insurance. Implications 1. Average dental outlays of the families buying insurance is (800 + 1000) / 2 = 900. 2. The naive insurance company runs a deficit. Observation The insurance company has to adopt a different premium policy in order to make a profit. Nash equilibrium Choice of policy by a rational insurance company: Offer insurance at a price of 1000. Only the families with the highest dental outlays will buy insurance. Pareto inefficiency: adverse selection Figure 7.1: The order of decisions in the hidden characteristics problem Example: Insurance Suppose V = 1 and X = Xg = 3, 50% population is type G  Xb = 7, 50% population is type B Figure 7.2: Decision order and payoffs in the insurance with complete information Complete contingent contract A contract can and will specify a price for each state / type. A contract consists therefore of two variables, i.e. {p3, p7}. Figure 7.3: Equilibrium in the insurance market with complete information Nash equilibrium Principal: {4,8} Agent of type 3: Yes Agent of type 7: Yes Figure 7.4: Asymmetric information / hidden chara