Non-Exclusive Competition Under Adverse Selection

45 Pages Posted: 11 Apr 2011

See all articles by Andrea Attar

Andrea Attar

Toulouse School of Economics; University of Roma Tor Vergata

Thomas Mariotti

University of Toulouse I

Francois Salanie

National Institute for Agricultural Research (INRA); University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: April 7, 2011

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 pro t. 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.

Keywords: Adverse Selection, Competing Mechanisms, Non-Exclusivity

JEL Classification: D43, D82, D86

Suggested Citation

Attar, Andrea and Mariotti, Thomas and Salanie, Francois, Non-Exclusive Competition Under Adverse Selection (April 7, 2011). CEIS Working Paper No. 192. Available at SSRN: https://ssrn.com/abstract=1804849 or http://dx.doi.org/10.2139/ssrn.1804849

Andrea Attar (Contact Author)

Toulouse School of Economics

21, allée de Brienne
Toulouse, F 31000
France
+33 5 61128578 (Phone)

University of Roma Tor Vergata ( email )

2 Via Columbia
00100 Rome
Italy

Thomas Mariotti

University of Toulouse I ( email )

Toulouse, 31000
France

Francois Salanie

National Institute for Agricultural Research (INRA) ( email )

21, Allee de Brienne
31000 Toulouse
France

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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