Tools
Tools
Attar, Andrea, Mariotti, Thomas and Salanié, François (2016) On Competitive Nonlinear Pricing. TSE Working Paper, n. 16-737, Toulouse
 | There is a more recent version of this item available. |
|
Text
Download (498kB) | Preview |
Abstract
We study a discriminatory limit-order book in which uninformed market makers compete in nonlinear tariffs to serve an informed insider. Our model allows for general nonparametric specifications of preferences and for arbitrary discrete distributions for the insider's private information. We show that adverse selection severely restricts possible equilibrium outcomes: in any pure-strategy equilibrium, tariffs must be linear and at most one type may trade, leading to an extreme form of market breakdown. As a result, such equilibria only exist under exceptional circumstances. The Bertrandlike logic underlying these results markedly differs from Cournot-like analyses of the limit-order book that postulate a continuum of types. We argue that these contrasting outcomes can be reconciled when one considers "-equilibria of either the game with a large number of market makers or the game with a large number of insider types. Mixed-strategy equilibria, by contrast, lead to a new class of equilibrium predictions that calls for further analysis.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | November 2016 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | Adverse Selection, Competing Mechanisms, Limit-Order Book |
| JEL Classification: | D43 - Oligopoly and Other Forms of Market Imperfection D82 - Asymmetric and Private Information D86 - Economics of Contract - Theory |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse), TSM Research (Toulouse) |
| Institution: | Universite Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 23 Nov 2016 08:56 |
| Last Modified: | 05 Oct 2020 11:26 |
| OAI Identifier: | oai:tse-fr.eu:26891 |
| URI: | http://publications.ut-capitole.fr/id/eprint/22530 |
Available Versions of this Item
- On Competitive Nonlinear Pricing. (deposited 23 Nov 2016 08:56) [Currently Displayed]
Actions (login required)
 |
View Item |
