On the Welfare Effects of Adverse - Selection in Oligopolistic Markets

Marco de Pinto, Laszlo Goerke and Alberto Palermo ()
Additional contact information
Marco de Pinto: University of Applied Labour Studies, Mannheim
Alberto Palermo: Institute for Labour Law and Industrial Relations in the EC, University of Trier

No 202202, IAAEU Discussion Papers from Institute of Labour Law and Industrial Relations in the European Union (IAAEU)

Abstract: We consider a principal-agent relationship with adverse selection. Principals pay informational rents due to asymmetric information and sell their output in a homogeneous Cournot-oligopoly. We find that asymmetric information may mitigate or more than compensate the welfare reducing impact of market power, irrespective of whether the number of firms is given exogenously or determined endogenously by a profit constraint. We further show that welfare in a setting with adverse selection may be higher than the maximized welfare level attainable in a world with perfect observability.

Keywords: Adverse Selection; Oligopoly; Welfare (search for similar items in EconPapers)
JEL-codes: D43 D82 L51 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2022-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
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https://www.iaaeu.de/images/DiscussionPaper/2022_02.pdf First version, 2022 (application/pdf)

Related works:
Journal Article: On the welfare effects of adverse selection in oligopolistic markets (2023)
Working Paper: On the Welfare Effects of Adverse Selection in Oligopolistic Markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:iaa:dpaper:202202

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