All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

 
Helton Saulo and Jeremias Leao
 
''Equilibrium, Adverse Selection, and Statistical Distributions''
( 2011, Vol. 31 No.3 )
 
 
This paper addresses the problem of multiple equilibria in markets with adverse selection. Akerlof (1970) identified an unique equilibrium of the total market failure under adverse selection. Posterioly, Wilson (1979, 1980) argued that the presence of adverse selection may lead to multiple equilibria. In particular, this paper extends the work of Rose (1993), who stated that the existence of multiple equilibria depends on the distribution of quality. Rose found that multiple equilibria are highly unlikely for most standard probability distributions. This work considers additional statistical distributions for quality. The simulation results suggest the existence of multiple equilibria when the quality follows a beta normal distribution.
 
 
Keywords: Adverse Selection; Multiple Equilibria; Statistical Distributions; Akerlof-Wilson Model.
JEL: C1 - Econometric and Statistical Methods: General
D0 - Microeconomics: General
 
Manuscript Received : Mar 21 2011 Manuscript Accepted : Jul 12 2011

  This abstract has been downloaded 204 times                The Full PDF of this paper has been downloaded 87747 times