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Decomposable principal-agent problems

Author

Listed:
  • Noldeke,G.
  • Samuelson,L.

    (University of Wisconsin-Madison, Social Systems Research Institute)

Abstract

This paper investigates conditions under which the adverse selection principal-agent problem can be decomposed into a collection of pointwise maximization problems. The analysis uses an extension of the type assignment approach to optimal nonuniform pricing, pioneered by Goldman, Leland and Sibley (1984), to derive simple sufficient conditions under which such a decomposition is possible. These conditions do not preclude optimal bunching that arises because virtual surplus functions violate the single-crossing property or participation constraints bind at interior types.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Noldeke,G. & Samuelson,L., 2004. "Decomposable principal-agent problems," Working papers 14, Wisconsin Madison - Social Systems.
    • Handle: RePEc:att:wimass:200414
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    File URL: http://www.ssc.wisc.edu/~larrysam/papers/PAMay-11-2004.pdf
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    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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