Joseph E. Stiglitz: 2 ideas worth knowing

2 ideas from Joseph E. Stiglitz, each explained in a minute and credited to the original work. Free on Savvy.

An insurer can get you to reveal your own risk level without ever asking
Michael Rothschild and Joseph Stiglitz showed that when an insurance company can't tell risky customers from safe ones directly, it can offer a menu of contracts, a cheap policy wi…
— Michael Rothschild, Joseph Stiglitz, Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information
Paying workers more than the market requires can still be the rational move
In 1984, Carl Shapiro and Joseph Stiglitz showed that when firms can't perfectly monitor effort, paying above the market-clearing wage gives workers something to lose by shirking. …
— Carl Shapiro and Joseph E. Stiglitz, Equilibrium Unemployment as a Worker Discipline Device

Five ideas worth knowing, every week