Rothschild and Stiglitz’s mean preserving: revisited

摘要

Lemma 1 in the classic paper by Rothschild and Stiglitz (J Econom Theory 2:225–243, 1970) is incorrect. We use the concept of “single” mean preserving spread to provide a version of this critical lemma. It is shown that this modified lemma can in fact be used to prove Rothschild and Stiglitz’s principal result.