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Ironing without control

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  • Toikka, Juuso
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    Abstract

    I extend Myersonʼs [R. Myerson, Optimal auction design, Math. Oper. Res. 6 (1981) 58–73] ironing technique to more general objective functions. The approach is based on a generalized notion of virtual surplus which can be maximized pointwise even when the monotonicity constraint implied by incentive compatibility binds. It is applicable to quasilinear principal-agent models where the standard virtual surplus is weakly concave in the allocation or appropriately separable in the allocation and type. No assumptions on allocation rules are required beyond monotonicity.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053111000871
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 146 (2011)
    Issue (Month): 6 ()
    Pages: 2510-2526

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    Handle: RePEc:eee:jetheo:v:146:y:2011:i:6:p:2510-2526

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    Web page: http://www.elsevier.com/locate/inca/622869

    Related research

    Keywords: Optimization; Monotonicity constraint; Mechanism design; Ironing;

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    1. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Jullien, Bruno, 1997. "Participation Constraints in Adverse Selection Models," IDEI Working Papers 67, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Georg Nöldeke & Larry Samuelson, 2006. "Optimal Bunching without Optimal Control," Working papers 2006/12, Faculty of Business and Economics - University of Basel.
    4. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, October.
    5. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    6. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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