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Nonexclusive competition under adverse selection

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Author Info

  • Mariotti, Thomas

    ()
    (Toulouse School of Economics)

  • Salanié, François

    ()
    (Toulouse School of Economics)

  • Attar, Andrea

    ()
    (Toulouse School of Economics and Facoltà di Economia, Università degli Studi di Roma "Tor Vergata")

Abstract

A seller of a divisible good faces several identical buyers. The quality of the good may be low or high, and is the seller's private information. The seller has strictly convex preferences that satisfy a single-crossing property. Buyers compete by posting menus of nonexclusive contracts, so that the seller can simultaneously and privately trade with several buyers. We provide a necessary and sufficient condition for the existence of a pure-strategy equilibrium. Aggregate equilibrium trades are unique. Any traded contract must yield zero profit. If a quality is actually traded, then it is efficiently traded. Depending on parameters, both qualities may be traded, or only one of them, or the market may break down to a no-trade equilibrium.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 9 (2014)
Issue (Month): 1 (January)
Pages:

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Handle: RePEc:the:publsh:1126

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Web page: http://econtheory.org

Related research

Keywords: Adverse selection; competing mechanisms; nonexclusivity;

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References

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  1. Han, Seungjin, 2006. "Menu theorems for bilateral contracting," Journal of Economic Theory, Elsevier, vol. 131(1), pages 157-178, November.
  2. Vives, Xavier, 2008. "Strategic Supply Function Competition with Private Information," CEPR Discussion Papers 6960, C.E.P.R. Discussion Papers.
  3. Peters, Michael, 2003. "Negotiation and take it or leave it in common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 88-109, July.
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  6. Andrea Attar & Thomas Mariotti & François Salanié, 2011. "Nonexclusive Competition in the Market for Lemons," Econometrica, Econometric Society, vol. 79(6), pages 1869-1918, November.
  7. Kyle, Albert S, 1989. "Informed Speculation with Imperfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 317-55, July.
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  9. Alberto Bisin & Danilo Guaitoli, 2004. "Moral Hazard and Nonexclusive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 306-328, Summer.
  10. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  11. Andrea Attar & Arnold Chassagnon, 2006. "On moral hazard and nonexclusive contracts," PSE Working Papers halshs-00589101, HAL.
  12. Bernard Caillaud & Patrick Rey & Roger Guesnerie & Jean Tirole, 1987. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," Working papers 472, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Thomas Philippon & Vasiliki Skreta, 2012. "Optimal Interventions in Markets with Adverse Selection," American Economic Review, American Economic Association, vol. 102(1), pages 1-28, February.
  14. Amy Finkelstein & James Poterba, 2000. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," NBER Working Papers 8045, National Bureau of Economic Research, Inc.
  15. Jaynes, Gerald David, 1978. "Equilibria in monopolistically competitive insurance markets," Journal of Economic Theory, Elsevier, vol. 19(2), pages 394-422, December.
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  17. Christine A. Parlour & Uday Rajan, 2001. "Competition in Loan Contracts," American Economic Review, American Economic Association, vol. 91(5), pages 1311-1328, December.
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Citations

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Cited by:
  1. Seungjin Han, 2012. "Implicit Collusion in Non-Exclusive Contracting under Adverse Selection," Department of Economics Working Papers 2012-15, McMaster University, revised Apr 2013.
  2. von Siemens, Ferdinand A. & Kosfeld, Michael, 2014. "Team production in competitive labor markets with adverse selection," European Economic Review, Elsevier, vol. 68(C), pages 181-198.
  3. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2013. "Two-sided communication in competing mechanism games," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 62-70.

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