Abstract
This paper studies markets with asymmetric information. When the market is modelled as a standard signalling game, inefficient outcomes arise due to the arbitrariness of off-the-equilibrium path beliefs. Such inefficient outcomes are shown not to arise in a novel game that combines signalling and competitive screening. In this game, the informed party makes an initial offer to all uninformed parties, but the uninformed parties are allowed to make counter-offers after accepting the initial offer. The initial offer serves as a barrier to potential cream-skimming deviations, and hence, equilibrium is shown to generically exist. As such, the paper also contributes to the literature that focuses on laying strategic foundations for efficient competition in competitive screening markets.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
