Working paper

Entry-Proofness and Market Breakdown under Adverse Selection

Andrea Attar, Thomas Mariotti, and François Salanié

Abstract

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.

Keywords

Adverse Selection; Entry Proofness; Market Breakdown; Nonexclusivity;

JEL codes

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

Reference

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.

See also

Published in

TSE Working Paper, n. 17-788, March 2017, revised February 2019