Article

On Competitive Nonlinear Pricing

Andrea Attar, Thomas Mariotti et François Salanié

Résumé

We study a discriminatory limit-order book in which market makers compete in nonlinear tariffs to serve a privately informed insider. Our model allows for general nonparametric specifications of preferences and arbitrary discrete distributions for the insider's private information. Adverse selection severely restricts equilibrium outcomes: in any pure-strategy equilibrium with convex tariffs, pricing must be linear and at most one type can trade, leading to an extreme form of market breakdown. As a result, such equilibria only exist under exceptional circumstances that we fully characterize. These results are strikingly different from those of existing analyses that postulate a continuum of types. The two approaches can be reconciled when we consider "- equilibria of games with a large number of market makers or a large number of types.

Mots-clés

Adverse Selection; Competing Mechanisms; Limit-Order Book;

Codes JEL

  • D43: Oligopoly and Other Forms of Market Imperfection
  • D82: Asymmetric and Private Information • Mechanism Design
  • D86: Economics of Contract: Theory

Remplace

Andrea Attar, Thomas Mariotti et François Salanié, « On Competitive Nonlinear Pricing », TSE Working Paper, n° 16-737, novembre 2016, révision mars 2018.

Référence

Andrea Attar, Thomas Mariotti et François Salanié, « On Competitive Nonlinear Pricing », Theoretical Economics, vol. 14, n° 1, janvier 2019, p. 297–343.

Publié dans

Theoretical Economics, vol. 14, n° 1, janvier 2019, p. 297–343