Screening with Frames: Implementation in Extensive Form

Franz Ostrizek and Denis Shishkin

The Review of Economic Studies, 2023, vol. 90, issue 4, 2042-2082

Abstract: We study a decision-framing design problem: a principal faces an agent with frame-dependent preferences and designs an extensive form with a frame at each stage. This allows the principal to circumvent incentive compatibility constraints by inducing dynamically inconsistent choices of the sophisticated agent. We show that a vector of contracts can be implemented if and only if it can be implemented using a canonical extensive form, which has a simple high–low–high structure using only three stages and the two highest frames, and employs unchosen decoy contracts to deter deviations. We then turn to the study of optimal contracts in the context of the classic monopolistic screening problem and establish the existence of a canonical optimal mechanism, even though our implementability result does not directly apply. In the presence of naive types, the principal can perfectly screen by cognitive type and extract full surplus from naifs.

Keywords: Implementation; Screening; Framing; Extensive-form decision problems; Dynamic inconsistency; Sophistication; Naivete; D42; D82; D90; L12 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/restud/rdac070 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Screening With Frames: Implementation in Extensive Form (2022)
Working Paper: Screening with Frames: Implementation in Extensive Form (2022)
Working Paper: Screening with Frames: Implementation in Extensive Form (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:90:y:2023:i:4:p:2042-2082.

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().