On Competitive Nonlinear Pricing Andrea Attar, Thomas Mariotti, Francois Salanie
On competitive nonlinear pricing Andrea Attar, Thomas Mariotti, Francois Salanie To cite this version: Andrea Attar, Thomas Mariotti, Francois Salanie. On competitive nonlinear pricing. Theoretical Economics, Econometric Society, 2019, 14 (1), pp.297-343. 10.3982/TE2708. hal-02097209 HAL Id: hal-02097209 https://hal.archives-ouvertes.fr/hal-02097209 Submitted on 26 May 2020 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Distributed under a Creative Commons Attribution - NonCommercial| 4.0 International License Theoretical Economics 14 (2019), 297–343 1555-7561/20190297 On competitive nonlinear pricing Andrea Attar Toulouse School of Economics, CNRS, University of Toulouse Capitole and Dipartimento di Economia e Finanza, Università degli Studi di Roma“Tor Vergata” Thomas Mariotti Toulouse School of Economics, CNRS, University of Toulouse Capitole François Salanié Toulouse School of Economics, INRA, University of Toulouse Capitole 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 distri- butions for the insider’s private information. Adverse selection severely restricts equilibrium outcomes: in any pure-strategy equilibrium with convex tariffs, pric- ing must be linear and at most one type can trade, leading to an extreme form of market breakdown.
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