Non-Exclusive Competition Under Adverse Selection
IDEI, Université de Toulouse I.; University of Roma II, Tor Vergata
University of Toulouse I
affiliation not provided to SSRN
April 7, 2011
CEIS Working Paper No. 192
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 prot. 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.
Number of Pages in PDF File: 45
Keywords: Adverse Selection, Competing Mechanisms, Non-Exclusivity
JEL Classification: D43, D82, D86working papers series
Date posted: April 11, 2011
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