Competitive Equilibrium in Screening Markets with Unbounded Types
We show that the equilibrium existence result for markets with adverse selection of Azevedo and Gottlieb (2017) does not generically extend to settings with unbounded consumer types. We provide conditions under which equilibria do exists in these environments in terms of equilibria of associated truncated economies. We illustrate the role of our conditions by explicitly building the equilibrium in a non-trivial insurance market, and show that it features unbounded prices.
Joint work with Andre Veiga (Imperial College London) .