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Reducing incentive constraints in bidimensional screening

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  • Calagua, Braulio

Abstract

This paper studies screening problems with quasilinear preferences, where agents' private information is two-dimensional and the allocation instrument is one-dimensional. A pre-order in the set of types is defined comparing types by their marginal valuation for the instrument, which allows reducing the incentive compatibility constraints that must be checked. With this approach, the discretized problem becomes computationally tractable. As an application, it is numerically solved an example from Lewis and Sappington [Lewis, T. and Sappington, D. E., 1988. Regulating a monopolist with unknown demand and cost functions. The RAND Journal of Economics, 438-457].

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  • Calagua, Braulio, 2018. "Reducing incentive constraints in bidimensional screening," MPRA Paper 101966, University Library of Munich, Germany, revised 2020.
    • Handle: RePEc:pra:mprapa:101966
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    References listed on IDEAS

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    7. Aloisio Araujo & Sergei Vieira & Braulio Calagua, 2022. "A necessary optimality condition in two-dimensional screening," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 781-806, April.
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    More about this item

    Keywords

    two-dimensional screening; Spence-Mirrlees condition; incentive compatibility; regulation of a monopoly.;
    All these keywords.

    JEL classification:

    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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