Anonymity And Individual Risk

Competitive equilibria in adverse selection economies with private information are generally studied in models with a market structure that has risk neutral firms, market segmentation and contract exclusivity. An alternative market structure closer to the standard Arrow-Debreu framework is studied here in which risk averse agents trade contingent claims directly through a clearing house. The result is the competitive equilibrium with anonymity, which has the properties that the exclusivity of contracts cannot be enforced, agents can enter into side markets, and markets are not segmented. The allocation results in a set of endogenous transfers and subsidies.