Monotone Decision Rules and Supermodularity

Gregorio Curello ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We study decision problems under uncertainty involving the choice of a rule mapping states into actions. We show that for any rule, there exists an increasing rule generating higher expected value for all payoff functions that are supermodular in action and state. We present applications to problems of taxation, betting, and price-discrimination in markets with demand externalities. We then consider rules mapping noisy signals of the state into actions. Under some conditions, optimal rules are increasing when (a) several agents are constrained to choose a single rule or (b) the relationship between signal and state is ambiguous. Moreover, standard informativeness criteria apply.

Keywords: monotone comparative statics; rearrangement; optimal taxation; price discrimination; uncertainty; informativeness (search for similar items in EconPapers)
JEL-codes: C61 D71 D81 (search for similar items in EconPapers)
Pages: 28
Date: 2024-06
New Economics Papers: this item is included in nep-des and nep-mic
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