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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
    as

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    File URL: http://www.ssc.wisc.edu/~larrysam/papers/PAMay-11-2004.pdf
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    References listed on IDEAS

    as
    1. Araujo, Aloisio & Moreira, Humberto, 2010. "Adverse selection problems without the Spence-Mirrlees condition," Journal of Economic Theory, Elsevier, pages 1113-1141.
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    3. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
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    5. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, pages 329-369.
    6. Bruno Biais & David Martimort & Jean-Charles Rochet, 2000. "Competing Mechanisms in a Common Value Environment," Econometrica, Econometric Society, vol. 68(4), pages 799-838, July.
    7. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. M. Barry Goldman & Hayne E. Leland & David S. Sibley, 1984. "Optimal Nonuniform Prices," Review of Economic Studies, Oxford University Press, vol. 51(2), pages 305-319.
    9. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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    12. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
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    14. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, pages 157-180.
    15. Laffont, Jean-Jacques & Maskin, Eric, 1987. "Monopoly with asymmetric information about quality : Behavior and regulation," European Economic Review, Elsevier, vol. 31(1-2), pages 483-489.
    16. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
    17. Peter J. Hammond, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 263-282.
    18. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
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    More about this item

    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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