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Nonexclusive competition under adverse selection

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  • ,

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

  • ,

    (Toulouse School of Economics)

  • ,

    (Toulouse School of Economics)

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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  • , & , & ,, 2014. "Nonexclusive competition under adverse selection," Theoretical Economics, Econometric Society, vol. 9(1), January.
    • Handle: RePEc:the:publsh:1126
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    More about this item

    Keywords

    Adverse selection; competing mechanisms; nonexclusivity;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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