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Non-Exclusive Competition under Adverse Selection

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Abstract

Consider a seller of a divisible good, facing 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 arbitrary menus of contracts. Competition is non-exclusive in that the seller can simultaneously and secretly trade with several buyers. We fully characterize conditions for the existence of an equilibrium. Equilibrium aggregate allocations are unique. Any traded contract must yield zero profit. If a quality is indeed traded, then it is traded efficiently. Depending on parameters, both qualities may be traded, or only one of them, or the market may break down completely to a no-trade equilibrium.

Suggested Citation

  • Andrea Attar & Thomas Mariotti & François Salanié, 2011. "Non-Exclusive Competition under Adverse Selection," CEIS Research Paper 192, Tor Vergata University, CEIS, revised 31 Mar 2011.
    • Handle: RePEc:rtv:ceisrp:192
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    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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