NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Information and Economic Efficiency

Richard Arnott, Bruce Greenwald, Joseph E. Stiglitz

NBER Working Paper No. 4533 (Also Reprint No. r1992)
Issued in November 1993
NBER Program(s):   PE

Is an economy with adverse selection, moral hazard, or an incomplete set of risk markets "constrained" Pareto efficient? There are two sets of papers addressing this question, one asserting that, under seemingly quite general conditions, the economy is constrained Pareto efficient, the other (to which we have contributed) that it is not. In this paper, we delineate the differences in assumptions between the two sets of papers, and under our assumptions present an intuitive proof of the Pareto inefficiency of market equilibrium with moral hazard and identify what it is that the government can do that the market cannot.

download in pdf format
   (863 K)

email paper

This paper is available as PDF (863 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4533

Published: Information Economics and Policy Vol. 6 (1994), pp. 77-88 citation courtesy of

Users who downloaded this paper also downloaded these:
Greenwald and Stiglitz w3359 Asymmetric Information and the New Theory of the Firm: Financial Constraints and Risk Behavior
Stiglitz w1566 Economics of Information and the Theory of Economic Development
Arnott and Stiglitz w3316 The Welfare Economics of Moral Hazard
Stiglitz w3641 The Invisible Hand and Modern Welfare Economics
Greenwald and Stiglitz w3652 Information, Finance, and Markets: The Architecture of Allocative Mechanisms
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us