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Decomposable Principal-Agent Problems

Author

Listed:
  • Georg Noldeke

    (Department of Economics, University of Bonn)

  • Larry Samuelson

    (Department of Economics, University of Wisconsin)

Abstract

This paper investigates conditions under which the adverse selection principal-agent problem can be decomposed into a collection of pointwise maximization problems. The analysis uses an extension of the type assignment approach to optimal nonuniform pricing, pioneered by Goldman, Leland and Sibley (1984), to derive simple sufficient conditions under which such a decomposition is possible. These conditions do not preclude optimal bunching that arises because virtual surplus functions violate the single-crossing property or participation constraints bind at interior types.

Suggested Citation

  • Georg Noldeke & Larry Samuelson, 2004. "Decomposable Principal-Agent Problems," Microeconomics 0410004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0410004
    Note: Type of Document - pdf; pages: 37
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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