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Monotonicity in optimal mechanisms in general quasi-linear environments with a continuum of types

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  • Yu Chen

    (University of Graz)

Abstract

This paper provides conditions for the existence of optimal mechanism, in which the assignment rule takes the monotonic form and is determined independently of the transfer rule, in a principal-agent problem with a general quasi-linear environment. It is based on a complete characterization result of incentive-compatible mechanisms by monotonicity, envelope, and lower boundary individual rationality conditions. In particular, we present a general result for such an existence, which is also applicable to the scenarios without linear payoffs or regularity (lattice-related) conditions.

Suggested Citation

  • Yu Chen, 2019. "Monotonicity in optimal mechanisms in general quasi-linear environments with a continuum of types," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 277-290, December.
    • Handle: RePEc:spr:etbull:v:7:y:2019:i:2:d:10.1007_s40505-018-00161-1
    DOI: 10.1007/s40505-018-00161-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Monotonicity; Principal-agent problem; Optimal mechanism; Quasi-linear environment; Helly’s selection principle;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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