The Scope of Sequential Screening with Ex-Post Participation Constraints

Dirk Bergemann, Francisco Castro and Gabriel Weintraub
Additional contact information
Francisco Castro: Graduate School of Business, Columbia University
Gabriel Weintraub: Graduate School of Business, Stanford University

No 2078R2, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study the classic sequential screening problem in the presence of buyers� ex-post participation constraints. A leading example is the online display advertising market, in which publishers frequently do not use up-front fees and instead use transaction-contingent fees. We establish conditions under which the optimal selling mechanism is static and buyers are not screened with respect to their interim type, or sequential and the buyers are screened with respect to their interim type. In particular, we provide an intuitive necessary and sufficient condition under which the static contract is optimal for general distributions of ex-post values. Further, we completely characterize the optimal sequential contract with binary interim types and continuum of ex-post values when this condition fails. Importantly, the latter contract randomizes the allocation of the low type buyer while giving a deterministic allocation to the high type. We also provide partial results for the case of multiple interim types.

Keywords: Sequential screening; Ex-post participation constraints; Static contract; Sequential contract (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2017-02, Revised 2018-06
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The scope of sequential screening with ex post participation constraints (2020)
Working Paper: The Scope of Sequential Screening with Ex-Post Participation Constraints (2020)
Working Paper: The Scope of Sequential Screening with Ex-Post Participation Constraints (2019)
Working Paper: The Scope of Sequential Screening with Ex-Post Participation Constraints (2018)
Working Paper: The Scope of Sequential Screening with Ex-Post Participation Constraints (2017)
Working Paper: The Scope of Sequential Screening with Ex-Post Participation Constraints (2017)
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