Attar, Andrea, Mariotti, Thomas
and Salanié, François
(2019)
On competitive nonlinear pricing.
Theoretical Economics, vol. 14 (n° 1).
pp. 297-343.
This is the latest version of this item.
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: | 08 Apr 2021 12:42 |
OAI Identifier: | oai:tse-fr.eu:32852 |
URI: | http://publications.ut-capitole.fr/id/eprint/26141 |
Available Versions of this Item
-
On competitive nonlinear pricing. (deposited 23 Nov 2016 08:56)
- On competitive nonlinear pricing. (deposited 20 Jul 2018 09:21) [Currently Displayed]
Actions (login required)
![]() |
View Item |