On Signalling and Screening in Markets with Asymmetric Information

29 Pages Posted: 5 Mar 2016 Last revised: 9 Mar 2018

See all articles by Anastasios Dosis

Anastasios Dosis

ESSEC Business School; University of Cergy-Pontoise - THEMA

Date Written: December 11, 2017

Abstract

This paper studies stylised markets with asymmetric information. When the market is modelled as a standard signalling game, inefficient outcomes arise due to the arbitrariness of off-the-equilibrium path beliefs. Such inefficient outcomes are shown not to arise in a novel game that combines signalling and competitive screening. In this game, the informed party makes an initial offer to all uninformed parties, but the uninformed parties are allowed to make counter-offers after accepting the initial offer. The initial offer serves as a barrier to potential cream-skimming deviations, and hence, equilibrium is shown to generically exist. As such, the paper also contributes to the literature that focuses on laying strategic foundations for efficient competition in competitive screening markets.

Keywords: Signalling, competitive screening, asymmetric information, existence, efficiency

JEL Classification: D82, D86

Suggested Citation

Dosis, Anastasios, On Signalling and Screening in Markets with Asymmetric Information (December 11, 2017). Journal of Mathematical Economics, Vol. 75, p. 140‑149, 2018. Available at SSRN: https://ssrn.com/abstract=2739792 or http://dx.doi.org/10.2139/ssrn.2739792

Anastasios Dosis (Contact Author)

ESSEC Business School

3 Avenue Bernard Hirsch
B.P 50105
Cergy - Pontoise Cedex, NA 95021
France

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

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