Price caps and efficiency in markets with adverse selection (Q2668983)

The author of the paper studies general insurance markets with adverse selection in which companies offer plans and compete in terms of prices schedules. It is demonstrated that an equilibrium exists in every economy under a basic price regulation, in which price caps are determined by companies. The main theorem of the paper is proved by characterizing off the equilibrium strategies under which a sufficient share of all consumer types selects a plan of deviating firm.