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Ironing without control

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  • Toikka, Juuso

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.

Suggested Citation

  • Toikka, Juuso, 2011. "Ironing without control," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2510-2526.
    • Handle: RePEc:eee:jetheo:v:146:y:2011:i:6:p:2510-2526
    DOI: 10.1016/j.jet.2011.06.003
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    References listed on IDEAS

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    1. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, January.
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    7. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    8. Donald M. Topkis, 1978. "Minimizing a Submodular Function on a Lattice," Operations Research, INFORMS, vol. 26(2), pages 305-321, April.
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    Keywords

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    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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