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Method of Digraphs for Multi-dimensional Screening

Author

Listed:
  • Sergey Kokovin

    () (National Research University Higher School of Economics, Russian Federation
    Novosibirsk State University)

  • Babu Nahata

    () (University of Louisville)

Abstract

Abstract We study a general model of multi-dimensional screening for discrete types of consumers without the single-crossing condition or any other essential restrictions. Such generality motivates us to introduce graph theory into optimization by treating each combination of active constraints as a digraph. Our relaxation of the constraints (a slackness parameter) excludes bunching and cycles among the constraints. Then, the only possible solution structures are rivers, which are acyclic rooted digraphs, and the Lagrange multipliers can be used to characterize the solutions. Relying on these propositions, we propose and justify an optimization algorithm. In the experiments, its branch-and-bound version with a good starting plan shows fewer iterations than a complete search among all rivers.

Suggested Citation

  • Sergey Kokovin & Babu Nahata, 2017. "Method of Digraphs for Multi-dimensional Screening," Annals of Operations Research, Springer, vol. 253(1), pages 431-451, June.
  • Handle: RePEc:spr:annopr:v:253:y:2017:i:1:d:10.1007_s10479-016-2320-3
    DOI: 10.1007/s10479-016-2320-3
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    References listed on IDEAS

    as
    1. Andersson, Tommy, 2008. "Efficiency properties of non-linear pricing schedules without the single-crossing condition," Economics Letters, Elsevier, vol. 99(2), pages 364-366, May.
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    4. Babu Nahata & Serguei Kokovin & Evgeny Zhelobodko, 2003. "Self-Selection Under Non-Ordered Valuations: Type-Splitting, Envy-Cycles, Rationing And Efficiency," General Economics and Teaching 0307001, University Library of Munich, Germany.
    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.
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    9. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
    10. Kokovin, S. & Nahata, B. & Zhelobodko, E., 2011. "All Solution Graphs in Multidimensional Screening," Journal of the New Economic Association, New Economic Association, issue 11, pages 10-38.
    11. Kokovin, Sergey & Nahata, Babu & Zhelobodko, Evgeny, 2010. "Multidimensional screening under nonlinear costs: Limits of standard approach," Economics Letters, Elsevier, vol. 107(2), pages 263-265, May.
    12. Kokovin, Sergey & Nahata, Babu & Zhelobodko, Evgeny, 2013. "Dupuit conjecture for constrained screening: Overall distortion and type-partitioning," Economics Letters, Elsevier, vol. 118(3), pages 439-441.
    13. Bonatti, Alessandro, 2011. "Brand-specific tastes for quality," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 562-575, September.
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