Working paper

Competitive Nonlinear Pricing under Adverse Selection

Andrea Attar, Thomas Mariotti, and François Salanié

Abstract

This article surveys recent attempts at characterizing competitive allocations under adverse selection when each informed agent can privately trade with several uninformed parties: that is, trade is nonexclusive. We rst show that requiring market outcomes to be robust to entry selects a unique candidate allocation, which involves cross-subsidies. We then study how to implement this allocation as the equilibrium outcome of a game in which the uninformed parties, acting as principals, compete by making oers to the informed agents. We show that equilibria typically fail to exist in competitive- screening games, in which these oers are simultaneous. We nally explore alternative extensive forms, and show that the candidate allocation can be implemented through a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets.

Keywords

Adverse Selection; Entry-Proofness; Discriminatory Pricing; Nonexclusive; Markets; Ascending Auctions;

JEL codes

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

Replaced by

Andrea Attar, Thomas Mariotti, and François Salanié, “Competitive Nonlinear Pricing under Adverse Selection”, in Advances in Economics and Econometrics, Victor Chernozhukov, Johannes Hörner, Eliana La Ferrara, and Ivan Werning (eds.), chapter 1, September 2025, forthcoming.

Reference

Andrea Attar, Thomas Mariotti, and François Salanié, “Competitive Nonlinear Pricing under Adverse Selection”, TSE Working Paper, n. 21-1201, April 2021, revised August 2022.

See also

Published in

TSE Working Paper, n. 21-1201, April 2021, revised August 2022