On competitive equilibria with asymmetric information

Jérôme Pouyet (1) , Bernard Salanie (2) , François Salanie

1 X - École polytechnique
2 Columbia University [New York]

Asymmetric information is widely supposed to impair the functioning of markets. We show that the presence of competition may invalidate this intuition. Consider a market in which principals compete for attracting heterogeneous agents by offering contracts. Suppose contracts are exclusive, and there are constant returns to trade. When the agents' types are publicly observed under mild conditions, competitive equilibria are efficient. Efficiency is also obtained when types are privately observed, provided that principals do not directly care about the agents' private information (the private value case). Thus hidden information only matters in competitive markets if it affects common values.

Mots clés: Competition; Information; Adverse selection; Moral hazard

Domaines: Economies et finances

Jérôme Pouyet, Bernard Salanie, François Salanie. On competitive equilibria with asymmetric information. The B. E. Journal of Theoretical Economics, 2008, 8 (1), pp.13. ⟨10.2202/1935-1704.1385⟩. ⟨halshs-00754317⟩