Distortion in Screening and Spatial Preferences

Sergey Kokovin, Babu Nahata () and Evgeny Zhelobodko
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Babu Nahata: University of Louisville

HSE Working papers from National Research University Higher School of Economics

Abstract: We study a multidimensional screening problem with minimal restrictions on valuations. Our ?-relaxation of the constraints excludes bunching and cycles in the graph of active incentive-compatibility constraints. Therefore, the Lagrange multipliers do exist and enable us in characterizing distortion. In particular, under “spatial” preferences that include both the Hotelling and the Spence-Mirrlees cases, the solution has a simple planar graph. Consequently, the pattern of distortion is centrifugal, i.e., the points of service are biased towards the low-valuation market segments

Keywords: incentive compatibility; multidimensional screening; second-degree price discrimination; non-linear pricing; product line; distortion; envy-graphs (search for similar items in EconPapers)
JEL-codes: D42 D82 L10 L12 L40 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014
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Published in WP BRP Series: Economics / EC, December 2014, pages 1-26

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