Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265260 
Year of Publication: 
2022
Series/Report no.: 
IAAEU Discussion Paper Series in Economics No. 02/2022
Publisher: 
University of Trier, Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier
Abstract: 
We consider a principal-agent relationship with adverse selection. Principals pay informational rents due to asymmetric information and sell their output in a homogeneous Cournot-oligopoly. We find that asymmetric information may mitigate or more than compensate the welfare reducing impact of market power, irrespective of whether the number of firms is given exogenously or determined endogenously by a profit constraint. We further show that welfare in a setting with adverse selection may be higher than the maximized welfare level attainable in a world with perfect observability.
Subjects: 
Adverse Selection
Oligopoly
Welfare
JEL: 
D43
D82
L51
Document Type: 
Working Paper

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