Optimality of sequential screening with multiple units and ex post participation constraints

Daniel Krähmer and Roland Strausz

Economics Letters, 2016, vol. 142, issue C, 64-68

Abstract: We show that in sequential screening problems with ex post participation constraints, optimal contracts elicit the agent’s pay-off irrelevant ex ante information when the principal and agent can trade multiple units, in contrast to when they can trade a single unit only. The difference arises because with multiple units, the principal can price each unit differently, giving rise to a larger number of screening instruments. Optimal contracts implement output schedules that are not monotone in the initial information. We identify regularity conditions which ensure that non-monotone schedules are incentive compatible.

Keywords: Sequential screening; Static screening; ex post participation constraints (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:142:y:2016:i:c:p:64-68

DOI: 10.1016/j.econlet.2016.03.010

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