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Solving multidimensional screening problems using a generalized single crossing property

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  • William Dodds

    (Tulane University)

Abstract

This paper derives necessary and sufficient conditions for allocations to be incentive compatible in multidimensional screening problems that satisfy a generalized single crossing property. We then devise a numerical method based on these results to solve multidimensional screening problems. Importantly, our numerical method can be applied to multidimensional screening problems for which existing approaches cannot be applied. We apply this method to several numerical examples in the context of multidimensional optimal taxation. In addition to illustrating how to apply our theoretical results and implement our numerical method, our simulations highlight the importance of bunching in optimal multidimensional taxation. Finally, we prove that bunching must occur in multidimensional optimal taxation problems when the social planner has sufficiently redistributive preferences.

Suggested Citation

  • William Dodds, 2024. "Solving multidimensional screening problems using a generalized single crossing property," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 77(4), pages 1025-1084, June.
    • Handle: RePEc:spr:joecth:v:77:y:2024:i:4:d:10.1007_s00199-023-01519-8
    DOI: 10.1007/s00199-023-01519-8
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    More about this item

    Keywords

    Multidimensional screening; Bunching; Incentive compatibility; Multidimensional taxation;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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