Three principles of competitive nonlinear pricing
This paper makes three contributions: (1) A competitive revelation principle for contracting games in which several principals compete for one privately informed agent. Specifically, given any profile of incentive compatible indirect contracting mechanisms, there exists an incentive compatible direct contracting mechanism that, in all circumstances, generates the same contract selection as the profile of indirect mechanisms. (2) A competitive taxation principle. That is, given any incentive compatible direct contracting mechanism, there exists a unique profile of nonlinear pricing schedules that implements the mechanism and the converse. (3) Existence of Nash equilibrium for the mixed extension of the nonlinear pricing game. This is proven using the taxation principle (2 above) and a result due to Reny, Econometrica 1999. To appear as a CERMSEM, Paris 1, Working Paper and also on http://www.warwick.ac.uk/fac/soc/Economics/research/twerps.html.
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- 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.
- Page, Frank H, Jr, 1992. "Mechanism Design for General Screening Problems with Moral Hazard," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 265-81, April.
- Peter J. Hammond, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 263-282.
- 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.
- Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
- 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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