This article attempts to understand the outcomes when each party of an insurance contract simultaneously has superior information. I decompose the risk (probability of loss) of a policyholder into a general risk and a specific risk. I assume that policy-holders have superior information about specific risks while insurers have superior information about general risks. Based on this assumption, I derive the equilibrium outcomes in competitive insurance markets where insurers try to signal their information as well as screen policyholders.
展开▼
