When is multidimensional screening a convex program?

DOI10.1016/J.JET.2010.11.006zbMATH Open1282.90085arXiv0912.3033OpenAlexW2000844733WikidataQ112632359 ScholiaQ112632359MaRDI QIDQ533086FDOQ533086

Authors: Alessio Figalli, Young-Heon Kim, Robert J. McCann 

Publication date: 2 May 2011

Published in: Journal of Economic Theory (Search for Journal in Brave)

Abstract: A principal wishes to transact business with a multidimensional distribution of agents whose preferences are known only in the aggregate. Assuming a twist (= generalized Spence-Mirrlees single-crossing) hypothesis and that agents can choose only pure strategies, we identify a structural condition on the preference b(x,y) of agent type x for product type y -- and on the principal's costs c(y) -- which is necessary and sufficient for reducing the profit maximization problem faced by the principal to a convex program. This is a key step toward making the principal's problem theoretically and computationally tractable; in particular, it allows us to derive uniqueness and stability of the principal's optimum strategy -- and similarly of the strategy maximizing the expected welfare of the agents when the principal's profitability is constrained. We call this condition non-negative cross-curvature: it is also (i) necessary and sufficient to guarantee convexity of the set of b-convex functions, (ii) invariant under reparametrization of agent and/or product types by diffeomorphisms, and (iii) a strengthening of Ma, Trudinger and Wang's necessary and sufficient condition (A3w) for continuity of the correspondence between an exogenously prescribed distribution of agents and of products. We derive the persistence of economic effects such as the desirability for a monopoly to establish prices so high they effectively exclude a positive fraction of its potential customers, in nearly the full range of non-negatively cross-curved models.

Full work available at URL: https://arxiv.org/abs/0912.3033

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zbMATH Keywords

bunchingrobustnessscreeningnonlinear pricingoptimal transportationprice discriminationasymmetric informationprincipal-agentmechanism designmonopolyincentive compatibilityoptimal taxationexclusioncross-curvatureMa-Trudinger-Wangmultidimensional signallingprivate imperfect incomplete informationsocial welfare maximization under budget constraint

Mathematics Subject Classification ID

Convex programming (90C25) Management decision making, including multiple objectives (90B50)

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Cited In (33)

• Adaptive, anisotropic and hierarchical cones of discrete convex functions
• Convexity and multi-dimensional screening for spaces with different dimensions
• Hölder continuity and injectivity of optimal maps
• Linearized optimal transport on manifolds
• Necessary and sufficient conditions for continuity of optimal transport maps on Riemannian manifolds
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