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Three Principles of Competitive Nonlinear Pricing

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  • Page, F.H.Jr.
  • Monteiro, P.K.

Abstract

We make three contributions to the theory of contracting under asymmetric information. First, we establish a competitive revelation principle for contracting games in which several principals compete for one privately informed agent. In particular, we show that given any profile of incentive compatible indirect contracting mechanisms, there exists an incentive compatible direct contracting mechanism which in all circumstances generates the same contract selection as the profile of indirect mechanisms. Second, we establish a competitive taxation principle.

Suggested Citation

  • Page, F.H.Jr. & Monteiro, P.K., 2001. "Three Principles of Competitive Nonlinear Pricing," The Warwick Economics Research Paper Series (TWERPS) 592, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:592
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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp592a.pdf
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    References listed on IDEAS

    as
    1. Rochet, J. C., 1985. "The taxation principle and multi-time Hamilton-Jacobi equations," Journal of Mathematical Economics, Elsevier, vol. 14(2), pages 113-128, April.
    2. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
    3. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    4. Page, Frank H, Jr, 1992. "Mechanism Design for General Screening Problems with Moral Hazard," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 265-281, April.
    5. Carlier, Guillaume, 2001. "A general existence result for the principal-agent problem with adverse selection," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 129-150, February.
    6. Peter J. Hammond, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 263-282.
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    More about this item

    Keywords

    INFORMATION ; GAMES ; TAXATION;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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