Solving multidimensional screening problems using a generalized single crossing property

William Dodds

Economic Theory, 2024, vol. 77, issue 4, No 6, 1025-1084

Abstract: Abstract This paper derives necessary and sufficient conditions for allocations to be incentive compatible in multidimensional screening problems that satisfy a generalized single crossing property. We then devise a numerical method based on these results to solve multidimensional screening problems. Importantly, our numerical method can be applied to multidimensional screening problems for which existing approaches cannot be applied. We apply this method to several numerical examples in the context of multidimensional optimal taxation. In addition to illustrating how to apply our theoretical results and implement our numerical method, our simulations highlight the importance of bunching in optimal multidimensional taxation. Finally, we prove that bunching must occur in multidimensional optimal taxation problems when the social planner has sufficiently redistributive preferences.

Keywords: Multidimensional screening; Bunching; Incentive compatibility; Multidimensional taxation (search for similar items in EconPapers)
JEL-codes: D82 D86 H21 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00199-023-01519-8

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