John H. Boyd - Senior Research Officer
Edward C. Prescott - Senior Monetary Advisor
Bruce D. Smith
Revised February 1, 1988
Three economic environments are reviewed, and in each organizations play an essential role. For an adverse selection insurance economy, we find that when mutual insurance arrangements are permitted an equilibrium necessarily exists and is optimal. This example, and the two others, illustrate the problems that may result from imposing organizational structure on an environment rather than permitting the structure to be determined endogenously.
Download Paper (PDF)