Abstract

http://ssrn.com/abstract=2372661
 


 



Imperfect Competition in Selection Markets


Neale Mahoney


University of Chicago Booth School of Business; National Bureau of Economic Research (NBER)

E. Glen Weyl


Microsoft Research New England; University of Chicago

April 3, 2014


Abstract:     
Many standard intuitions about the distortions created by market power and selection are reversed when these forces co-exist. Adverse selection may be socially beneficial under monopoly, for example, and market power may be beneficial in the presence of advantageous selection. We develop a model of symmetric imperfect competition in selection markets that parameterizes the degree of both market power and selection. We derive basic comparative statics and illustrate them graphically to build intuition. We emphasize the relevance of the most counterintuitive effects with a calibrated model of the insurance market. We also apply our results to competition policy and show that in selection markets four core principles of the United States Horizontal Merger Guidelines are often reversed.

Number of Pages in PDF File: 47

Keywords: selection market, imperfect competition, mergers, risk adjustment, risk-based pricing

JEL Classification: D42, D43, D82, I13, L10, L41

working papers series


Download This Paper

Date posted: December 30, 2013 ; Last revised: April 4, 2014

Suggested Citation

Mahoney, Neale and Weyl, E. Glen, Imperfect Competition in Selection Markets (April 3, 2014). Available at SSRN: http://ssrn.com/abstract=2372661 or http://dx.doi.org/10.2139/ssrn.2372661

Contact Information

Neale Mahoney
University of Chicago Booth School of Business ( email )
5807 South Woodlawn Ave
Chicago, IL 60637
United States
773.702.9278 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Eric Glen Weyl (Contact Author)
Microsoft Research New England ( email )
One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States
(857) 998-4513 (Phone)
HOME PAGE: http://www.glenweyl.com
University of Chicago ( email )
1126 East 59th Street
Chicago, IL 60637
United States
(773) 702-4862 (Phone)
(773) 702-8490 (Fax)
HOME PAGE: http://www.glenweyl.com
Feedback to SSRN


Paper statistics
Abstract Views: 962
Downloads: 302
Download Rank: 55,844

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.657 seconds