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Investing to access an adverse selection market

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  • Heinsalu, Sander

Abstract

I analyse a market with asymmetric information and interdependent values. Accessing the market is costly and stochastic, e.g. requires lobbying, licences or R&D. For a range of parameter values, interventions that raise production or entry costs for all seller types increase trade, investment and payoff for all types. This effect is driven by a novel feedback loop between the market composition and the investment in access.

Suggested Citation

  • Heinsalu, Sander, 2020. "Investing to access an adverse selection market," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:indorg:v:72:y:2020:i:c:s0167718720300837
    DOI: 10.1016/j.ijindorg.2020.102660
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    References listed on IDEAS

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    Cited by:

    1. Sarah Auster & Nenad Kos & Salvatore Piccolo, 2021. "Optimal Pricing, Private Information and Search for an Outside Offer," ECONtribute Discussion Papers Series 081, University of Bonn and University of Cologne, Germany.
    2. Heinsalu, Sander, 2021. "Promotion of (interaction) abstinence increases infection prevalence," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 94-112.
    3. Sarah Auster & Nenad Kos & Salvatore Piccolo, 2021. "Optimal pricing, private information and search for an outside offer," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 758-777, December.

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    More about this item

    Keywords

    Lemons market; Common values; Costly entry; Market composition; Asymmetric information;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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