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From Bottom of the Barrel to Cream of the Crop: Sequential Screening with Positive Selection

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  • Tirole, Jean

Abstract

In a number of interesting environments, dynamic screening involves positive selection: in contrast with Coasian dynamics, only the most motivated remain over time. The paper provides conditions under which the principal's commitment optimum is time consistent and uses this result to derive testable predictions under permanent or transient shocks. It also identifies environments in which time consistency does not hold despite positive selection, and yet simple equilibrium characterizations can be obtained.

Suggested Citation

  • Tirole, Jean, 2016. "From Bottom of the Barrel to Cream of the Crop: Sequential Screening with Positive Selection," TSE Working Papers 16-672, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:30552
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    References listed on IDEAS

    as
    1. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, pages 1601-1615.
    2. Helmut Bester & Roland Strausz, "undated". "Imperfect Commitment and the Revelation Principle," Papers 004, Departmental Working Papers.
    3. Gerardi, Dino & Hörner, Johannes & Maestri, Lucas, 2014. "The role of commitment in bilateral trade," Journal of Economic Theory, Elsevier, vol. 154(C), pages 578-603.
    4. John Riley & Richard Zeckhauser, 1983. "Optimal Selling Strategies: When to Haggle, When to Hold Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 267-289.
    5. repec:eee:jetheo:v:171:y:2017:i:c:p:136-173 is not listed on IDEAS
    6. Dino Gerardi & Lucas Maestri, 2013. "Bargaining over a Divisible Good in the Market for Lemons," Carlo Alberto Notebooks 312, Collegio Carlo Alberto.
    7. 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, vol. 25(3), pages 329-369, December.
    8. Kruse, Thomas & Strack, Philipp, 2015. "Optimal stopping with private information," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 702-727.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    repeated relationships; screening; positive selection; time consistency; shifting preferences; exit games;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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