Theory of Screening and the Behavior of the Firm: Comment
Abstract
possibilities. The concept of equilibrium differs depending upon the assumptions concerning the behavior of the firm as Michael Rothschild and Stiglitz, and others point out.' In this comment, I reconsider the Stiglitz screening model, assuming that the behavior of the firm is more responsive to profitable possibilities than that considered by Stiglitz. I show that the screening process in the Stiglitz model has similarities with that in the Spence model in some aspects. I also point out other characteristics of the Stiglitz model, considering the existence of equilibria in the cases of no social return from screening and of positive social return from screening, and show that the existence of equilibria depends upon the supposed behavior of the firm and the concept of equilibrium in the Stiglitz model.
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