[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v99y2014icp85-95.html
   My bibliography  Save this article

Implicit collusion in non-exclusive contracting under adverse selection

Author

Listed:
  • Han, Seungjin
Abstract
This paper studies how implicit collusion may take place through simple non-exclusive contracting under adverse selection when multiple buyers (e.g., entrepreneurs with risky projects) non-exclusively contract with multiple firms (e.g., banks). It shows that any price schedule can be supported as equilibrium terms of trade in the market if each firm's expected profit is no less than its reservation profit. Firms sustain collusive outcomes through the triggering trading mechanism in which they change their terms of trade contingent only on buyers’ reports on the lowest average price that the deviating firm's trading mechanism would induce.

Suggested Citation

  • Han, Seungjin, 2014. "Implicit collusion in non-exclusive contracting under adverse selection," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 85-95.
    • Handle: RePEc:eee:jeborg:v:99:y:2014:i:c:p:85-95
    DOI: 10.1016/j.jebo.2013.12.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268113003119
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2013.12.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-1372, September.
    2. Andrea Attar & Thomas Mariotti & François Salanié, 2011. "Nonexclusive Competition in the Market for Lemons," Econometrica, Econometric Society, vol. 79(6), pages 1869-1918, November.
    3. Laurence Ales, 2009. "Adverse Selection and Non-exclusive Contracts," 2009 Meeting Papers 854, Society for Economic Dynamics.
    4. Bruno Biais & David Martimort & Jean-Charles Rochet, 2000. "Competing Mechanisms in a Common Value Environment," Econometrica, Econometric Society, vol. 68(4), pages 799-838, July.
    5. Alessandro Pavan & Giacomo Calzolari, 2010. "Truthful Revelation Mechanisms for Simultaneous Common Agency Games," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 132-190, May.
    6. Pavan, Alessandro & Calzolari, Giacomo, 2009. "Sequential contracting with multiple principals," Journal of Economic Theory, Elsevier, vol. 144(2), pages 503-531, March.
    7. Gerald D. Jaynes, 2011. "Equilibrium and Strategic Communication in the Adverse Selection Insurance Model," Levine's Working Paper Archive 786969000000000243, David K. Levine.
    8. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    9. Jaynes, Gerald D., 2011. "Equilibrium and Strategic Communication in the Adverse Selection Insurance Model," Working Papers 91, Yale University, Department of Economics.
    10. , & , & ,, 2014. "Nonexclusive competition under adverse selection," Theoretical Economics, Econometric Society, vol. 9(1), January.
    11. Jaynes, Gerald David, 1978. "Equilibria in monopolistically competitive insurance markets," Journal of Economic Theory, Elsevier, vol. 19(2), pages 394-422, December.
    12. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    13. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2013. "Two-sided communication in competing mechanism games," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 62-70.
    14. David Martimort & Lars Stole, 2002. "The Revelation and Delegation Principles in Common Agency Games," Econometrica, Econometric Society, vol. 70(4), pages 1659-1673, July.
    15. Hellwig, Martin F., 1988. "A note on the specification of interfirm communication in insurance markets with adverse selection," Journal of Economic Theory, Elsevier, vol. 46(1), pages 154-163, October.
    16. Han, Seungjin, 2007. "Strongly robust equilibrium and competing-mechanism games," Journal of Economic Theory, Elsevier, vol. 137(1), pages 610-626, November.
    17. Han, Seungjin, 2006. "Menu theorems for bilateral contracting," Journal of Economic Theory, Elsevier, vol. 131(1), pages 157-178, November.
    18. Peters, Michael & Troncoso-Valverde, Cristián, 2013. "A folk theorem for competing mechanisms," Journal of Economic Theory, Elsevier, vol. 148(3), pages 953-973.
    19. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    20. Takuro Yamashita, 2010. "Mechanism Games With Multiple Principals and Three or More Agents," Econometrica, Econometric Society, vol. 78(2), pages 791-801, March.
    21. Epstein, Larry G. & Peters, Michael, 1999. "A Revelation Principle for Competing Mechanisms," Journal of Economic Theory, Elsevier, vol. 88(1), pages 119-160, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrea Attar & Catherine Casamatta & Arnold Chassagnon & Jean-Paul Décamps, 2019. "Multiple Lenders, Strategic Default, and Covenants," American Economic Journal: Microeconomics, American Economic Association, vol. 11(2), pages 98-130, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Attar, Andrea & Mariotti, Thomas & Salanié, François, 2021. "Competitive Nonlinear Pricing under Adverse Selection," TSE Working Papers 21-1201, Toulouse School of Economics (TSE), revised Aug 2022.
    2. Attar, Andrea & Mariotti, Thomas & Salanié, François, 2014. "Multiple Contracting in Insurance Markets," TSE Working Papers 14-532, Toulouse School of Economics (TSE), revised Sep 2016.
    3. Andrea Attar & Thomas Mariotti & François Salanié, 2022. "Regulating Insurance Markets: Multiple Contracting And Adverse Selection," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 981-1020, August.
    4. Thomas Mariotti, 2016. "Multiple Contracting in Insurance Markets," 2016 Meeting Papers 820, Society for Economic Dynamics.
    5. Ales, Laurence & Maziero, Pricila, 2016. "Non-exclusive dynamic contracts, competition, and the limits of insurance," Journal of Economic Theory, Elsevier, vol. 166(C), pages 362-395.
    6. Andrea Attar & Eloisa Campioni & Gwenaël Piaser & Uday Rajan, 2012. "Competing mechanism games of moral hazard: communication and robustness," Review of Economic Design, Springer;Society for Economic Design, vol. 16(4), pages 283-296, December.
    7. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2013. "Two-sided communication in competing mechanism games," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 62-70.
    8. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2019. "Private communication in competing mechanism games," Journal of Economic Theory, Elsevier, vol. 183(C), pages 258-283.
    9. , & , & ,, 2014. "Nonexclusive competition under adverse selection," Theoretical Economics, Econometric Society, vol. 9(1), January.
    10. Andrea Attar & Thomas Mariotti & François Salanié, 2021. "Entry-Proofness and Discriminatory Pricing under Adverse Selection," American Economic Review, American Economic Association, vol. 111(8), pages 2623-2659, August.
    11. Kosenko, Andrew & Stiglitz, Joseph & Yun, Jungyoll, 2023. "Bilateral information disclosure in adverse selection markets with nonexclusive competition," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 144-168.
    12. Joseph E. Stiglitz & Jungyoll Yun & Andrew Kosenko, 2019. "Characterization, Existence, and Pareto Optimality in Markets with Asymmetric Information and Endogenous and Asymmetric Disclosures: Basic Analytics of Revisiting Rothschild-Stiglitz," NBER Working Papers 26251, National Bureau of Economic Research, Inc.
    13. Joseph E. Stiglitz & Jungyoll Yun & Andrew Kosenko, 2017. "Equilibrium in a Competitive Insurance Market Under Adverse Selection with Endogenous Information," NBER Working Papers 23556, National Bureau of Economic Research, Inc.
    14. Laurence Ales, 2009. "Adverse Selection and Non-exclusive Contracts," 2009 Meeting Papers 854, Society for Economic Dynamics.
    15. Attar, Andrea & Campioni, Eloisa & Mariotti, Thomas & Pavan, Alessandro, 2021. "Keeping the Agents in the Dark: Private Disclosures in Competing Mechanisms," TSE Working Papers 21-1227, Toulouse School of Economics (TSE), revised Dec 2023.
    16. Attar, Andrea & Mariotti, Thomas & Salanié, François, 2019. "On competitive nonlinear pricing," Theoretical Economics, Econometric Society, vol. 14(1), January.
    17. Ghosh, Sambuddha & Han, Seungjin, 2012. "Repeated Contracting in Decentralised Markets," Microeconomics.ca working papers seungjin_han-2012-12, Vancouver School of Economics, revised 02 May 2013.
    18. Andrea Attar & Eloisa Campioni & Gwenael Piaser, 2011. "Information Revelation in Competing Mechanism Games," CEIS Research Paper 205, Tor Vergata University, CEIS, revised 04 Jul 2011.
    19. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2018. "On competing mechanisms under exclusive competition," Games and Economic Behavior, Elsevier, vol. 111(C), pages 1-15.
    20. Andrea Attar & Thomas Mariotti & François Salanié, 2011. "Nonexclusive Competition in the Market for Lemons," Econometrica, Econometric Society, vol. 79(6), pages 1869-1918, November.

    More about this item

    Keywords

    Collusion; Non-exclusive contracting; Competing mechanism;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:99:y:2014:i:c:p:85-95. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.