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Attar, Andrea, Mariotti, Thomas and Salanié, François (2019) On Competitive Nonlinear Pricing. Theoretical Economics, vol. 14 (n° 1). pp. 297-343.
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Abstract
We study a discriminatory limit-order book in which market makers compete in nonlinear tariffs to serve a privately informed insider. Our model allows for general nonparametric specifications of preferences and arbitrary discrete distributions for the insider's private information. Adverse selection severely restricts equilibrium outcomes: in any pure-strategy equilibrium with convex tariffs, pricing must be linear and at most one type can trade, leading to an extreme form of market breakdown. As a result, such equilibria only exist under exceptional circumstances that we fully characterize. These results are strikingly different from those of existing analyses that postulate a continuum of types. The two approaches can be reconciled when we consider "- equilibria of games with a large number of market makers or a large number of types.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | January 2019 |
| Refereed: | Yes |
| 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) |
| Site: | UT1 |
| Date Deposited: | 20 Jul 2018 09:21 |
| Last Modified: | 29 Sep 2020 12:23 |
| OAI Identifier: | oai:tse-fr.eu:32852 |
| URI: | http://publications.ut-capitole.fr/id/eprint/26141 |
Available Versions of this Item
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On Competitive Nonlinear Pricing. (deposited 23 Nov 2016 08:56)
- On Competitive Nonlinear Pricing. (deposited 20 Jul 2018 09:21) [Currently Displayed]
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