An Efficient Mechanism for Competitive Markets with Adverse Selection

Anastasios Dosis 1, 2
1 ESSEC
ESSEC Business School, Economics Department
Abstract : I construct an efficient mechanism for competitive markets with adverse selection. In the mechanism, each company offers two menus of contracts: a public menu and a private menu. The union of all the public menus needs to be offered by every active company in the market. On the contrary, a private menu concerns only the company that offers it. I show that this simple mechanism reduces the set of profitable deviations to the extent that a pure-strategy equilibrium exists in every market with adverse selection. Furthermore, I characterise general, well-studied environments in which the set of equilibrium allocations coincides with the set of efficient allocations.
Type de document :
Pré-publication, Document de travail
ESSEC Working paper. Document de Recherche ESSEC / Centre de recherche de l’ESSEC. ISSN : 1291-9616. WP 1604. 2016
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Anastasios Dosis. An Efficient Mechanism for Competitive Markets with Adverse Selection. ESSEC Working paper. Document de Recherche ESSEC / Centre de recherche de l’ESSEC. ISSN : 1291-9616. WP 1604. 2016. 〈hal-01282772〉

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