Efficient Competitive Equilibria with Adverse Selection
研究逆向选择下瓦尔拉斯市场是否有序运行，发现竞争均衡总是存在但通常不是激励有效的，通过设计消费权市场可内生化逆向选择的外部性，使第一和第二福利定理的激励约束版本成立。
Do Walrasian markets function orderly in the presence of adverse selection? In particular, is their outcome efficient when exclusive contracts are enforceable? This paper addresses these questions in the context of a Rothschild-Stiglitz insurance economy. We identify an externality associated with the presence of adverse selection as a special form of consumption externality. Consequently, we show that competitive equilibria always exist but are not typically incentive efficient. However, as markets for pollution rights can internalize environmental externalities, markets for consumption rights can be designed to internalize the consumption externality due to adverse selection. With such markets competitive equilibria exist and incentive-constrained versions of the first and second welfare theorems hold.