Solution Structures in Non-Ordered Discrete Screening Problems: Trees, Stars and Cycles

58 Pages Posted: 17 Jun 2006

See all articles by Babu Nahata

Babu Nahata

University of Louisville - College of Business - Department of Economics

Sergey G. Kokovin

Novosibirsk State University - Department of Economics

Evegeny Zhelobodko

Novosibirsk State University - Department of Economics

Date Written: July 2004

Abstract

We analyze discrete-type self-selection problem when valuations are multidimensional or non-ordered, and costs can be non-separable. Spence-Mirrlees condition is generalized for these situations to reveal solution structures like trees, "bushes" and "stars". Pareto efficient "star" structures are shown to be non-degenerate, as well as cycles. Cycles can result in overall inefficiency and non-implementability of solutions. Under costs separability or alternative assumptions, optimal solutions are free of "essential" cycles which make them implementable with small rewards. Non-trivial counter-examples show that our assumptions are essential.

Keywords: Multidimensional screening, quasi-auctions, principal-agent, selfselection,nonlinear pricing, package pricing, Pareto efficiency

JEL Classification: D42, L10, L40

Suggested Citation

Nahata, Babu and Kokovin, Sergey G. and Zhelobodko, Evegeny, Solution Structures in Non-Ordered Discrete Screening Problems: Trees, Stars and Cycles (July 2004). Available at SSRN: https://ssrn.com/abstract=909293 or http://dx.doi.org/10.2139/ssrn.909293

Babu Nahata (Contact Author)

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States
502-852-4864 (Phone)

Sergey G. Kokovin

Novosibirsk State University - Department of Economics ( email )

2 Pirogova Street
Novosibirsk 630090
Russia

Evegeny Zhelobodko

Novosibirsk State University - Department of Economics ( email )

2 Pirogova Street
Novosibirsk 630090
Russia

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