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An Efficient Mechanism for Competitive Markets with Adverse Selection

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  • Anastasios Dosis

    (ESSEC Business School and THEMA (UMR 8184) - ESSEC Business School - THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

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.

Suggested Citation

  • Anastasios Dosis, 2016. "An Efficient Mechanism for Competitive Markets with Adverse Selection," Working Papers hal-01282772, HAL.
    • Handle: RePEc:hal:wpaper:hal-01282772
    Note: View the original document on HAL open archive server: https://essec.hal.science/hal-01282772
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    References listed on IDEAS

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    Cited by:

    1. Anastasios Dosis, 2016. "A More General Definition of Equilibrium in Markets with Adverse Selection," Working Papers hal-01285188, HAL.
    2. Dosis, Anastasios, 2016. "A More General Definition of Equilibrium in Markets with Adverse Selection," ESSEC Working Papers WP1607, ESSEC Research Center, ESSEC Business School.

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    Keywords

    Adverse Selection; Competition; Mechanism Design; Existence; Efficiency;
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