Coalition-proof allocations in adverse-selection economies

We reexamine the canonical adverse selection insurance economy first studie d by Rothschild and Stiglitz [1976]. We define blocking in a way that takes private information into account and define a coalition-proof corresponden ce as a mapping from coalitions to allocations with the property that alloc ations are in the correspondence, if and only if, they are not blocked by a ny other allocations in the correspondence for any subcoalition. We prove t hat the Miyazaki allocation-the Pareto-optimal allocation (possibly cross-s ubsidized) most preferred by low-risk agents-is coalition-proof.