On the strategic use of risk and undesirable goods in multidimensional screening

A. Lachapelle and F. Santambrogio

Journal of Mathematical Economics, 2011, vol. 47, issue 6, pages 698-705

Abstract: A monopolist sells goods possibly with a characteristic consumers dislike (for instance, he sells random goods to risk averse agents), which does not affect the production costs. We investigate the question whether using undesirable goods is profitable to the seller. We prove that in general this may be the case, depending somehow on the correlation between agent types and aversion. This is due to screening effects that outperform this aversion. We analyze, in a continuous framework, several multidimensional cases.

Keywords: Principal–agent problem; Adverse selection; Calculus of variations; Nonlinear pricing (search for similar items in EconPapers)
Date: 2011
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Persistent link: http://EconPapers.repec.org/RePEc:eee:mateco:v:47:y:2011:i:6:p:698-705

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