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All Solution Graphs in Multidimensional Screening

Sergey Kokovin, Babu Nahata () and Evgeny Zhelobodko

Journal of the New Economic Association, 2011, issue 11, 10-38

Abstract: We study general discrete-types multidimensional screening without any noticeable restrictions on valuations, using instead epsilon-relaxation of the incentivecompatibility constraints. Any active (becoming equality) constraint can be perceived as "envy" arc from one type to another, so the set of active constraints is a digraph. We find that: (1) any solution has an in-rooted acyclic graph ("river"); (2) for any logically feasible river there exists a screening problem resulting in such river. Using these results, any solution is characterized both through its spanning-tree and through its Lagrange multipliers, that can help in finding solutions and their efficiency/distortion properties.

Keywords: incentive compatibility; multidimensional screening; second-degree price discrimination; non-linear pricing; graphs (search for similar items in EconPapers)
JEL-codes: D42 D82 L10 L12 L40 (search for similar items in EconPapers)
Date: 2011
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