A necessary optimality condition in two-dimensional screening

Aloisio Araujo (), Sergei Vieira () and Braulio Calagua
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Aloisio Araujo: IMPA
Sergei Vieira: Ibmec, Av. Presidente Wilson 118
Authors registered in the RePEc Author Service: Sergei Vieira Silva

Economic Theory, 2022, vol. 73, issue 2, No 19, 806 pages

Abstract: Abstract This paper studies adverse selection problems with a one-dimensional principal instrument and a two-dimensional agent type. We provide an optimality condition that characterizes the bunching of continuum types. The approach is based on a reparameterization of the type space in terms of the endogenous optimal allocation level curves. The condition obtained is related with the optimality of two pooling types in the one-dimensional screening without the single-crossing. We illustrate the method by analyzing one example from the literature as well as a new example far from the linear-quadratic case

Keywords: Two-dimensional screening; Bunching; Non single-crossing; Quasilinear equation; Characteristic curves (search for similar items in EconPapers)
JEL-codes: D42 D82 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00199-021-01352-x

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