Entry-Proofness and Discriminatory Pricing under Adverse Selection

This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. then use this result characterize, active market, unique budget-balanced allocation implemented by tariff making additional trades with entrant Motivated the recursive structure of allocation, we finally show that it emerges as essentially equilibrium outcome discriminatory ascending auction. These results yield sharp predictions nonexclusive markets. (JEL D11, D43, D82, D86)