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Monotone Allocations without Single-Crossing: When to Bunch and When to Jump

Author

Listed:
  • Aloisio Araujo
  • Carolina Parra
  • Sergei Vieira

Abstract

A principal screens an agent whose technology has a minimum efficient scale, so the Spence-Mirrlees condition fails along a monotone dividing curve: the locus at which every type values marginal output equally. For the class in which this curve and the relaxed solution are both strictly monotone, the optimal contract obeys a trichotomy, governed by how the two meet: a jump is impossible when they never meet, unavoidable across a flat dividing curve, a choice across a strictly increasing one. The optimum is found, not conjectured: each solution is certified as globally optimal among all implementable allocations, deterministic or random, by dualizing the family of binding constraints through an explicit weight; the certificates require neither linear primitives nor any restriction on the shape of the contract. Under mild regularity the class comprises exactly forty configurations; each is mapped to its forced shape, solved in closed form, and certified.

Suggested Citation

  • Aloisio Araujo & Carolina Parra & Sergei Vieira, 2026. "Monotone Allocations without Single-Crossing: When to Bunch and When to Jump," Papers 2608.19474, arXiv.org.
  • Handle: RePEc:arx:papers:2608.19474
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    File URL: https://arxiv.org/pdf/2608.19474
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