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Ironing without control

Juuso Toikka

Journal of Economic Theory, 2011, vol. 146, issue 6, 2510-2526

Abstract: I extend Myersonʼs [R. Myerson, Optimal auction design, Math. Oper. Res. 6 (1981) 58–73] ironing technique to more general objective functions. The approach is based on a generalized notion of virtual surplus which can be maximized pointwise even when the monotonicity constraint implied by incentive compatibility binds. It is applicable to quasilinear principal-agent models where the standard virtual surplus is weakly concave in the allocation or appropriately separable in the allocation and type. No assumptions on allocation rules are required beyond monotonicity.

Keywords: Optimization; Monotonicity constraint; Mechanism design; Ironing (search for similar items in EconPapers)
JEL-codes: C60 C70 D80 (search for similar items in EconPapers)
Date: 2011
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Handle: RePEc:eee:jetheo:v:146:y:2011:i:6:p:2510-2526