This paper develops a unified approach to entry-proofness in adversely selected markets. We first provide a necessary and sufficient condition for entry on an inactive market to be unprofitable. For active markets, we characterize the unique budgetbalanced market tariff preventing entry by a seller offering complementary trades. These results yield sharp predictions for competitive outcomes of nonexclusive markets, which we use to construct a new test for evidence of private information in insurance.
Adverse Selection; Entry Proofness; Market Breakdown; Nonexclusivity;
- D43: Oligopoly and Other Forms of Market Imperfection
- D82: Asymmetric and Private Information • Mechanism Design
- D86: Economics of Contract: Theory
Andrea Attar, Thomas Mariotti, and François Salanié, “Entry-Proofness and Market Breakdown under Adverse Selection”, TSE Working Paper, n. 17-788, March 2017, revised February 2019.
TSE Working Paper, n. 17-788, March 2017, revised February 2019