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Three principles of competitive nonlinear pricing

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  • Page, Frank Jr.
  • Monteiro, Paulo K.

Abstract

We make three contributions to the theory of contracting under asymmetric information. First, we establish a competitive analog to the revelation principle which we call the implementation principle. This principle provides a complete characterization of all incentive compatible, indirect contracting mechanisms in terms of contract catalogs, and allows us to conclude that in competitive contracting situations, firms in choosing their contracting strategies can restrict attention to contract catalogs. Second, we establish a competitive taxation principle. This principle, a refinement of the implementation principle, provides a complete characterization of all implementable nonlinear pricing schedules in terms of product-price catalogs and allows us to reduce any game played over nonlinear pricing schedules to a strategically equivalent game played over product price catalogs. Third, using the existence of Nash equilibria in discontinuous games, we demonstrate the existence of Nash equilibria for the mixed extension of the nonlinear pricing game.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 39 (2003)
Issue (Month): 1-2 (February)
Pages: 63-109

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Handle: RePEc:eee:mateco:v:39:y:2003:i:1-2:p:63-109

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Web page: http://www.elsevier.com/locate/jmateco

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References

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  1. Rochet, J. C., 1985. "The taxation principle and multi-time Hamilton-Jacobi equations," Journal of Mathematical Economics, Elsevier, vol. 14(2), pages 113-128, April.
  2. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  3. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  4. Page, Frank H, Jr, 1992. "Mechanism Design for General Screening Problems with Moral Hazard," Economic Theory, Springer, vol. 2(2), pages 265-81, April.
  5. Carlier, Guillaume, 2001. "A general existence result for the principal-agent problem with adverse selection," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 129-150, February.
  6. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
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Citations

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Cited by:
  1. Pavlo Prokopovych & Nicholas C.Yannelis, 2013. "On the Existence of Mixed Strategy Nash equilibria," Discussion Papers 50, Kyiv School of Economics.
  2. Florence Lachet-Touya, 2012. "Les interactions fiscales verticales à la lumière de la théorie des multiprincipaux," Recherches économiques de Louvain, De Boeck Université, vol. 78(1), pages 27-46.
  3. Schmitz, Patrick W., 2003. "On second-price auctions and imperfect competition," Journal of Mathematical Economics, Elsevier, vol. 39(8), pages 901-909, November.
  4. repec:hal:journl:halshs-00197491 is not listed on IDEAS
  5. Carmona, Guilherme & Fajardo, José, 2009. "Existence of equilibrium in common agency games with adverse selection," Games and Economic Behavior, Elsevier, vol. 66(2), pages 749-760, July.
  6. repec:hal:cesptp:halshs-00197491 is not listed on IDEAS
  7. Yu Chen, 2013. "Decentralizability of Multi-Agency Contracting with Bayesian Implementation," Caepr Working Papers 2013-003, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  8. Oriol Carbonell-Nicolau, 2011. "The Existence of Perfect Equilibrium in Discontinuous Games," Games, MDPI, Open Access Journal, vol. 2(3), pages 235-256, July.
  9. Nuno Gouveia, 2004. "General equilibrium with asymmetric information and default penalties," Cahiers de la Maison des Sciences Economiques b05051, Université Panthéon-Sorbonne (Paris 1), revised Jan 2005.
  10. Massimo Morelli & Huanxing Yang & Lixin Ye, 2012. "Competitive Nonlinear Taxation and Constitutional Choice," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 142-75, February.
  11. Monteiro, Paulo Klinger & Page Jr, Frank H., 2007. "Uniform payoff security and Nash equilibrium in compact games," Journal of Economic Theory, Elsevier, vol. 134(1), pages 566-575, May.
  12. Paulo Klinger Monteiro & Frank H. Page Jr, 2005. "Uniform payoff security and Nash equilibrium in metric games," Cahiers de la Maison des Sciences Economiques b05086, Université Panthéon-Sorbonne (Paris 1).
  13. Ulrich Horst & Santiago Moreno-Bromberg, 2011. "Efficiency and Equilibria in Games of Optimal Derivative Design," Papers 1107.0839, arXiv.org.
  14. repec:hal:journl:halshs-00195526 is not listed on IDEAS
  15. Page Jr., Frank H., 2008. "Catalog competition and stable nonlinear prices," Journal of Mathematical Economics, Elsevier, vol. 44(7-8), pages 822-835, July.
  16. Frank H. Page, Jr. & Paulo K. Monteiro, 2007. "Endogenous Mechanisms and Nash Equilibrium in Competitive Contracting," Caepr Working Papers 2007-025, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  17. Monteiro, Paulo K. & Page Jr., Frank H., 2009. "Endogenous mechanisms and Nash equilibrium in competitive contracting games," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 664-678, September.
  18. Martimort, David & Stole, Lars, 2012. "Representing equilibrium aggregates in aggregate games with applications to common agency," Games and Economic Behavior, Elsevier, vol. 76(2), pages 753-772.
  19. Florence LACHET-TOUYA, 2013. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working Papers 2012-2013_9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jul 2013.

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