Adverse selection without single crossing: Monotone solutions

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Standard

Adverse selection without single crossing : Monotone solutions. / Schottmüller, Christoph.

I: Journal of Economic Theory, Bind 158, 2015, s. 127-164.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Schottmüller, C 2015, 'Adverse selection without single crossing: Monotone solutions', Journal of Economic Theory, bind 158, s. 127-164. https://doi.org/10.1016/j.jet.2015.04.002

APA

Schottmüller, C. (2015). Adverse selection without single crossing: Monotone solutions. Journal of Economic Theory, 158, 127-164. https://doi.org/10.1016/j.jet.2015.04.002

Vancouver

Schottmüller C. Adverse selection without single crossing: Monotone solutions. Journal of Economic Theory. 2015;158:127-164. https://doi.org/10.1016/j.jet.2015.04.002

Author

Schottmüller, Christoph. / Adverse selection without single crossing : Monotone solutions. I: Journal of Economic Theory. 2015 ; Bind 158. s. 127-164.

Bibtex

@article{6bb98bff86a04e11bc6b2039e5a5e4ad,
title = "Adverse selection without single crossing: Monotone solutions",
abstract = "The single-crossing assumption simplifies the analysis of screening models as local incentive compatibility becomes sufficient for global incentive compatibility. If single crossing is violated, global incentive compatibility constraints have to be taken into account. This paper studies monotone solutions in a screening model that allows a one-time violation of single crossing.The results show that local and non-local incentive constraints distort the solution in opposite directions. Therefore, the optimal decision might involve distortions above as well as below the first-best decision. Furthermore, the well-known “no distortion at the top” property does not necessarily hold. The results show that the decision can even be distorted above first best for all types. Sufficient conditions for existence, (strict) monotonicity and continuity of the solution are presented. A new necessary condition satisfied by such solutions is found. An algorithm based on this condition can calculate continuous and strictly monotone solutions.",
keywords = "Faculty of Social Sciences, Global incentive compatibility, screening, Spence-Mirrlees condition",
author = "Christoph Schottm{\"u}ller",
note = "JEL classification: C61; D82; D86",
year = "2015",
doi = "10.1016/j.jet.2015.04.002",
language = "English",
volume = "158",
pages = "127--164",
journal = "Journal of Economic Theory",
issn = "0022-0531",
publisher = "Academic Press",

}

RIS

TY - JOUR

T1 - Adverse selection without single crossing

T2 - Monotone solutions

AU - Schottmüller, Christoph

N1 - JEL classification: C61; D82; D86

PY - 2015

Y1 - 2015

N2 - The single-crossing assumption simplifies the analysis of screening models as local incentive compatibility becomes sufficient for global incentive compatibility. If single crossing is violated, global incentive compatibility constraints have to be taken into account. This paper studies monotone solutions in a screening model that allows a one-time violation of single crossing.The results show that local and non-local incentive constraints distort the solution in opposite directions. Therefore, the optimal decision might involve distortions above as well as below the first-best decision. Furthermore, the well-known “no distortion at the top” property does not necessarily hold. The results show that the decision can even be distorted above first best for all types. Sufficient conditions for existence, (strict) monotonicity and continuity of the solution are presented. A new necessary condition satisfied by such solutions is found. An algorithm based on this condition can calculate continuous and strictly monotone solutions.

AB - The single-crossing assumption simplifies the analysis of screening models as local incentive compatibility becomes sufficient for global incentive compatibility. If single crossing is violated, global incentive compatibility constraints have to be taken into account. This paper studies monotone solutions in a screening model that allows a one-time violation of single crossing.The results show that local and non-local incentive constraints distort the solution in opposite directions. Therefore, the optimal decision might involve distortions above as well as below the first-best decision. Furthermore, the well-known “no distortion at the top” property does not necessarily hold. The results show that the decision can even be distorted above first best for all types. Sufficient conditions for existence, (strict) monotonicity and continuity of the solution are presented. A new necessary condition satisfied by such solutions is found. An algorithm based on this condition can calculate continuous and strictly monotone solutions.

KW - Faculty of Social Sciences

KW - Global incentive compatibility

KW - screening

KW - Spence-Mirrlees condition

U2 - 10.1016/j.jet.2015.04.002

DO - 10.1016/j.jet.2015.04.002

M3 - Journal article

VL - 158

SP - 127

EP - 164

JO - Journal of Economic Theory

JF - Journal of Economic Theory

SN - 0022-0531

ER -

ID: 135371013