IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v158y2015ipap127-164.html
   My bibliography  Save this article

Adverse selection without single crossing: Monotone solutions

Author

Listed:
  • Schottmüller, Christoph

Abstract

The single-crossing assumption simplifies the analysis of screening models as local incentive compatibility becomes sufficient for global incentive compatibility. If single crossing is violated, global incentive compatibility constraints have to be taken into account. This paper studies monotone solutions in a screening model that allows a one-time violation of single crossing.

Suggested Citation

  • Schottmüller, Christoph, 2015. "Adverse selection without single crossing: Monotone solutions," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 127-164.
    • Handle: RePEc:eee:jetheo:v:158:y:2015:i:pa:p:127-164
    DOI: 10.1016/j.jet.2015.04.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022053115000605
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jet.2015.04.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, vol. 55(2), pages 441-467, March.
    2. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, December.
    3. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    4. Araujo, Aloisio & Moreira, Humberto, 2010. "Adverse selection problems without the Spence-Mirrlees condition," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1113-1141, May.
    5. Nick Netzer & Florian Scheuer, 2010. "Competitive screening in insurance markets with endogenous wealth heterogeneity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(2), pages 187-211, August.
    6. Martin F. Hellwig, 2010. "Incentive Problems With Unidimensional Hidden Characteristics: A Unified Approach," Econometrica, Econometric Society, vol. 78(4), pages 1201-1237, July.
    7. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    8. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
    9. Aloisio Araujo & Daniel Gottlieb & Humberto Moreira, 2007. "A model of mixed signals with applications to countersignalling," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1020-1043, December.
    10. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
    11. David Martimort & Lars Stole, 2009. "Market participation in delegated and intrinsic common‐agency games," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 78-102, March.
    12. Guasch, J Luis & Weiss, Andrew, 1981. "Self-Selection in the Labor Market," American Economic Review, American Economic Association, vol. 71(3), pages 275-284, June.
    13. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-930, July.
    14. Bruno Jullien & Bernard Salanié & François Salanié, 2007. "Screening risk-averse agents under moral hazard: single-crossing and the CARA case," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(1), pages 151-169, January.
    15. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    16. James Andreoni & B. Douglas Bernheim, 2009. "Social Image and the 50-50 Norm: A Theoretical and Experimental Analysis of Audience Effects," Econometrica, Econometric Society, vol. 77(5), pages 1607-1636, September.
    17. Moore, John, 1984. "Global Incentive Constraints in Auction Design," Econometrica, Econometric Society, vol. 52(6), pages 1523-1535, November.
    18. Beard, T Randolph & Caudill, Steven B & Gropper, Daniel M, 1991. "Finite Mixture Estimation of Multiproduct Cost Functions," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 654-664, November.
    19. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-373, June.
    20. Giacomo Calzolari, 2004. "Incentive Regulation of Multinational Enterprises," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 257-282, February.
    21. Rochet, Jean-Charles, 2009. "Monopoly regulation without the Spence-Mirrlees assumption," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 693-700, September.
    22. Smart, Michael, 2000. "Competitive Insurance Markets with Two Unobservables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 153-169, February.
    23. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-937, October.
    24. Gabriel Carroll, 2012. "When Are Local Incentive Constraints Sufficient?," Econometrica, Econometric Society, vol. 80(2), pages 661-686, March.
    25. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
    26. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
    27. Marco Battaglini & Rohit Lamba, 2012. "Optimal Dynamic Contracting," Working Papers 1431, Princeton University, Department of Economics, Econometric Research Program..
    28. Hoffmann, Florian & Inderst, Roman, 2011. "Pre-sale information," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2333-2355.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kerkkamp, R.B.O. & van den Heuvel, W. & Wagelmans, A.P.M., 2018. "Two-echelon supply chain coordination under information asymmetry with multiple types," Omega, Elsevier, vol. 76(C), pages 137-159.
    2. Krähmer, Daniel & Strausz, Roland, 2017. "Sequential versus static screening: An equivalence result," Games and Economic Behavior, Elsevier, vol. 106(C), pages 317-328.
    3. Chia‐Hui Chen & Junichiro Ishida & Wing Suen, 2022. "Signaling Under Double‐Crossing Preferences," Econometrica, Econometric Society, vol. 90(3), pages 1225-1260, May.
    4. Chia-Hui Chen & Junichiro Ishida & Wing Suen, 2020. "Signaling under Double-Crossing Preferences," ISER Discussion Paper 1103r, Institute of Social and Economic Research, Osaka University, revised Dec 2020.
    5. Pishchulov, Grigory & Richter, Knut, 2016. "Optimal contract design in the joint economic lot size problem with multi-dimensional asymmetric information," European Journal of Operational Research, Elsevier, vol. 253(3), pages 711-733.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Araujo, Aloisio & Moreira, Humberto & Tsuchida, Marcos, 2011. "Do dividend changes signal future earnings?," Journal of Financial Intermediation, Elsevier, vol. 20(1), pages 117-134, January.
    2. Jensen, S., 2000. "Price Discrimination and Three Part Tariffs in a Duopoly," Papers 3/2000, Norwegian School of Economics and Business Administration-.
    3. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    4. Bester, Helmut & Strausz, Roland, 2007. "Contracting with imperfect commitment and noisy communication," Journal of Economic Theory, Elsevier, vol. 136(1), pages 236-259, September.
    5. Araujo, Aloisio & Moreira, Humberto, 2010. "Adverse selection problems without the Spence-Mirrlees condition," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1113-1141, May.
    6. Pascal Courty & Li Hao, 2000. "Sequential Screening," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 697-717.
    7. Hoppe, Eva I. & Schmitz, Patrick W., 2015. "Do sellers offer menus of contracts to separate buyer types? An experimental test of adverse selection theory," Games and Economic Behavior, Elsevier, vol. 89(C), pages 17-33.
    8. Friedrichsen, Jana, 2018. "Signals Sell: Product Lines when Consumers Differ Both in Taste for Quality and Image Concern," Rationality and Competition Discussion Paper Series 70, CRC TRR 190 Rationality and Competition.
    9. Chia‐Hui Chen & Junichiro Ishida & Wing Suen, 2022. "Signaling Under Double‐Crossing Preferences," Econometrica, Econometric Society, vol. 90(3), pages 1225-1260, May.
    10. Pishchulov, Grigory & Richter, Knut, 2016. "Optimal contract design in the joint economic lot size problem with multi-dimensional asymmetric information," European Journal of Operational Research, Elsevier, vol. 253(3), pages 711-733.
    11. Araujo, A. & Moreira, H. & Vieira, S., 2015. "The marginal tariff approach without single-crossing," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 166-184.
    12. Paul Beaudry & Charles Blackorby & Dezsö Szalay, 2009. "Taxes and Employment Subsidies in Optimal Redistribution Programs," American Economic Review, American Economic Association, vol. 99(1), pages 216-242, March.
    13. Martimort, David & Stole, Lars A., 2022. "Participation constraints in discontinuous adverse selection models," Theoretical Economics, Econometric Society, vol. 17(3), July.
    14. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    15. Jacquet, Laurence & Lehmann, Etienne & Van der Linden, Bruno, 2013. "Optimal redistributive taxation with both extensive and intensive responses," Journal of Economic Theory, Elsevier, vol. 148(5), pages 1770-1805.
    16. Braulio Calagua, 2023. "Reducing incentive constraints in bidimensional screening," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 8(1), pages 107-150, December.
    17. Jan Boone & Christoph Schottmüller, 2016. "Procurement with specialized firms," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 661-687, August.
    18. Pass, Brendan, 2012. "Convexity and multi-dimensional screening for spaces with different dimensions," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2399-2418.
    19. Paulo Barelli & Suren Basov & Mauricio Bugarin & Ian King, 2012. "The Robustness of Exclusion in Multi-dimensional Screening," RCER Working Papers 571, University of Rochester - Center for Economic Research (RCER).
    20. X. Ruiz del Portal, 2012. "Conditions for incentive compatibility in models with multidimensional allocation functions and one-dimensional types," Review of Economic Design, Springer;Society for Economic Design, vol. 16(4), pages 311-321, December.

    More about this item

    Keywords

    Spence–Mirrlees condition; Global incentive compatibility; Screening;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:158:y:2015:i:pa:p:127-164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.