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Competitive Nonlinear Pricing under Adverse Selection

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  • Attar, Andrea
  • Mariotti, Thomas
  • Salanié, François

Abstract

This article surveys recent attempts at characterizing competitive allocations under adverse selection when each informed agent can privately trade with several uninformed parties: that is, trade is nonexclusive. We rst show that requiring market outcomes to be robust to entry selects a unique candidate allocation, which involves cross-subsidies. We then study how to implement this allocation as the equilibrium outcome of a game in which the uninformed parties, acting as principals, compete by making oers to the informed agents. We show that equilibria typically fail to exist in competitive- screening games, in which these oers are simultaneous. We nally explore alternative extensive forms, and show that the candidate allocation can be implemented through a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets.

Suggested Citation

  • Attar, Andrea & Mariotti, Thomas & Salanié, François, 2021. "Competitive Nonlinear Pricing under Adverse Selection," TSE Working Papers 21-1201, Toulouse School of Economics (TSE), revised Aug 2022.
  • Handle: RePEc:tse:wpaper:125475
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    More about this item

    Keywords

    Adverse Selection; Entry-Proofness; Discriminatory Pricing; Nonexclusive; Markets; Ascending Auctions;
    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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