Entry-proofness and discriminatory pricing under adverse selection
Résumé
This paper studies competitive allocations under adverse selection. We rst provide a general necessary and sucient condition for entry on an inactive market to be
unprotable. We then use this result to characterize, for an active market, a unique budget-balanced allocation implemented by a market tari making additional trades
with an entrant unprotable. Motivated by the recursive structure of this allocation, we nally show that it emerges as the essentially unique equilibrium outcome of a
discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets..