On the Welfare Effects of Adverse Selection in Oligopolistic Markets

Marco de Pinto, Laszlo Goerke and Alberto Palermo

No 10003, CESifo Working Paper Series from CESifo

Abstract: We consider a principal-agent relationship with adverse selection. Principals pay informational rents due to asymmetric information and sell their output in a homogeneous Cournot-oligopoly. We find that asymmetric information may mitigate or more than compensate the welfare reducing impact of market power, irrespective of whether the number of firms is given exogenously or determined endogenously by a profit constraint. We further show that welfare in a setting with adverse selection may be higher than the maximized welfare level attainable in a world with perfect observability.

Keywords: adverse selection; oligopoly; welfare (search for similar items in EconPapers)
JEL-codes: D43 D82 L51 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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Related works:
Journal Article: On the welfare effects of adverse selection in oligopolistic markets (2023)
Working Paper: On the Welfare Effects of Adverse - Selection in Oligopolistic Markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10003

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