Abstract
In this paper, optimal derivative design when multiple firms compete for heterogenous customers is studied. Ties in the agents' best responses generate discontinuous payoffs. Efficient tie-breaking rules are considered: In a first step, the model presented by Carlier etal. (Math Financ Econ 1:57-80, 2007) is extended, and results of Page and Monteiro (J Math Econ 39:63-109, 2003, J Econ Theory 134:566-575, 2007, Econ Theory 34:503-524, 2008) are used to prove the existence of (mixed-strategies) Nash equilibria. In a second step, the case of risk minimizing firms is studied. Socially efficient allocations are introduced, and their existence is proved. In particular, the entropic risk measure is considered
Horst, Ulrich