This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. We then use this result to characterize, for an active market, a unique budget-balanced allocation implemented by a market tariff making additional trades with an entrant unprofitable. Motivated by the recursive structure of this allocation, we finally show that it emerges as the essentially unique equilibrium outcome of a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets.

Attar, A., Mariotti, T., Salanie, F. (2021). Entry-proofness and discriminatory pricing under adverse selection. THE AMERICAN ECONOMIC REVIEW, 111(8), 2623-2659 [10.1257/aer.20190189].

Entry-proofness and discriminatory pricing under adverse selection

Attar, AK
;
2021-01-01

Abstract

This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. We then use this result to characterize, for an active market, a unique budget-balanced allocation implemented by a market tariff making additional trades with an entrant unprofitable. Motivated by the recursive structure of this allocation, we finally show that it emerges as the essentially unique equilibrium outcome of a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets.
2021
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/01 - ECONOMIA POLITICA
Settore ECON-01/A - Economia politica
English
Articolo precedentemente diffuso con il titolo "Entry-proofness and market breakdown under adverse selection".
Attar, A., Mariotti, T., Salanie, F. (2021). Entry-proofness and discriminatory pricing under adverse selection. THE AMERICAN ECONOMIC REVIEW, 111(8), 2623-2659 [10.1257/aer.20190189].
Attar, A; Mariotti, T; Salanie, F
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/314139
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