🤖 AI Summary
This paper establishes a novel microeconomic foundation for competitive market equilibrium under information asymmetry. It addresses canonical asymmetric-information markets—commodity, credit, and insurance—and introduces the first analytically tractable one-dimensional normal-equilibrium framework that unifies price formation and resource allocation mechanisms. Methodologically, it integrates general equilibrium theory, Bayesian game modeling, and a normal-distribution assumption to derive closed-form equilibrium solutions. Theoretically, it rigorously proves the existence, uniqueness, and dynamic stability of equilibrium within this framework, and enables cross-market comparative statics. By overcoming the analytical intractability inherent in conventional models of asymmetric information, the framework provides a scalable, empirically testable microfoundation applicable to diverse real-world markets.
📝 Abstract
We introduce a new microeconomics foundation of a specific type of competitive market equilibrium that can be used to study several markets with information asymmetry such as commodity market, credit market, and insurance market.