Bertand Competition and the Existence of Pure Strategy Nash Equilibrium in Markets with Adverse Selection

Anastasios Dosis
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Anastasios Dosis: Essec Business School, Economics Department

No WP1606, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: I analyse a market with adverse selection in which companies competè a la Bertrand by offering menus of contracts. Contrary to Rothschild and Stiglitz (1976), I allow for any finite number of types and states and more general utility functions. I define the generalised Rothschild-Stiglitz Profile of Actions (RSPA), and I show that, in every possible market, if the RSPA is efficient, it is also a pure strategy Nash equilibrium profile of actions. On the contrary, I show that in markets in which the RSPA is not efficient, preferences admit an expected utility representation with strictly increasing and strictly concave VNM utilities and a weak sorting condition holds, no pure strategy Nash equilibrium exists.

Keywords: Nash Equilibrium; Adverse Selection; Bertrand Competition (search for similar items in EconPapers)
JEL-codes: C62 C72 D86 L13 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2016-02-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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