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

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    Keywords

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