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Nonexclusive competition under adverse selection

  • 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")

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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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
Contact details of provider: Web page: http://econtheory.org

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