Open AccessNonexclusive competition under adverse selection
Author(s) -
Attar Andrea,
Mariotti Thomas,
Salanié François
Publication year - 2014
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te1126
Subject(s) - adverse selection , profit (economics) , microeconomics , quality (philosophy) , competition (biology) , yield (engineering) , private information retrieval , zero (linguistics) , business , economics , computer science , ecology , biology , philosophy , linguistics , materials science , computer security , epistemology , metallurgy
A seller of a divisible good faces 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 menus of nonexclusive contracts, so that the seller can simultaneously and privately trade with several buyers. We provide a necessary and sufficient condition for the existence of a pure‐strategy equilibrium. Aggregate equilibrium trades are unique. Any traded contract must yield zero profit. If a quality is actually traded, then it is efficiently traded. Depending on parameters, both qualities may be traded, or only one of them, or the market may break down to a no‐trade equilibrium.