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on Contract Theory and Applications |
| By: | Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | I construct an efficient mechanism for competitive markets with adverse selection. In the mechanism, each company offers two menus of contracts: a public menu and a private menu. The union of all the public menus needs to be offered by every active company in the market. On the contrary, a private menu concerns only the company that offers it. I show that this simple mechanism reduces the set of profitable deviations to the extent that a pure-strategy equilibrium exists in every market with adverse selection. Furthermore, I characterise general, well-studied environments in which the set of equilibrium allocations coincides with the set of efficient allocations. |
| Keywords: | Efficiency,Adverse Selection,Competition,Mechanism Design,Existence |
| Date: | 2016–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01282772&r=cta |
| By: | Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique) |
| 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 |
| Date: | 2016–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01285185&r=cta |
| By: | Friedrichsen, Jana |
| Abstract: | One important function of consumption is for consumers to show off their taste, virtue or wealth. While empirical observations suggest that producers take this into account, existing research has concentrated on analyzing the demand side. This paper investigates how a monopolist optimally designs its product line when consumers differ both in their taste for quality and their desire for a positive social image. The monopolist distorts qualities and prices to allocate images to consumers. It generically pools consumers with different tastes because high-taste consumers lend a positive image to the product of their choice and thereby increase the product's value to others. Often, average quality is lower than in a market without image concerns and there is underprovision as compared to the welfare-maximizing allocation. Although average quality is higher in a competitive market, welfare typically is not. |
| Keywords: | image motivation,conspicuous consumption,two-dimensional screening,mechanism design |
| JEL: | D21 D82 L15 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbmbh:spii2016202&r=cta |
| By: | Joshua S. Gans; Michael L. Katz |
| Abstract: | We correct and extend the results of Gans (2015) regarding the effects of net neutrality regulation on equilibrium outcomes in settings where a content provider sells its services to consumers for a fee. We examine both pricing and investment effects. We extend the earlier paper’s result that weak forms of net neutrality are ineffective and also show that even a strong form of net neutrality may be ineffective. In addition, we demonstrate that, when strong net neutrality does affect the equilibrium outcome, it may harm efficiency by distorting both ISP and content provider investment and service-quality choices. |
| JEL: | D4 D42 D43 L1 L12 L13 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22040&r=cta |