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Imperfect Competition in Markets with Adverse or Advantageous Selection

Markus Parlasca

The Review of Economics and Statistics2026https://doi.org/10.1162/rest.a.1700article
AJG 4ABDC A*
Weight
0.50

Abstract

This paper proposes a spatial model of imperfect competition in markets with adverse or advantageous selection. The model shows that a reduction in competition exacerbates the inefficiency created by adverse selection but can ameliorate the inefficiency created by advantageous selection. However, reduced competition never corrects the inefficiency perfectly because it introduces an allocative inefficiency. By contrast, the inefficiency can be corrected perfectly through a corrective tax when there is perfect competition. Our results have implications for competition policy in credit and insurance markets, as they caution against viewing imperfect competition as a solution to the inefficiencies created by selection.

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https://doi.org/https://doi.org/10.1162/rest.a.1700

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@article{markus2026,
  title        = {{Imperfect Competition in Markets with Adverse or Advantageous Selection}},
  author       = {Markus Parlasca},
  journal      = {The Review of Economics and Statistics},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1162/rest.a.1700},
}

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Imperfect Competition in Markets with Adverse or Advantageous Selection

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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