An Efficient Mechanism for Competitive Markets with Adverse Selection

Anastasios Dosis

No WP1604, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

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.

Keywords: Efficiency; Adverse Selection; Competition Mechanism; Design; Existence (search for similar items in EconPapers)
JEL-codes: D02 D82 D86 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2016-02-22
New Economics Papers: this item is included in nep-com, nep-mic and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ebg:essewp:dr-16004

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