Ironing, sweeping and multidimensional screening. (English) Zbl 1015.91515

Rochet, Jean-Charles; Choné, Philippe

Econometrica 66, No. 4, 783-826 (1998).

Summary: The authors provide existence proofs and characterization results for the multidimensional version of the multiproduct monopolist problem of M. Mussa and S. Rosen [J. Econ. Theory 18, 301-317 (1978; Zbl 0403.90007)]. These results are also directly applicable to the multidimensional nonlinear pricing problems studied by R. B. Wilson [Nonlinear pricing, Oxford Univ. Press, New York (1993)] and M. Armstrong [Econometrica 64, 51-75 (1996; Zbl 0861.90015)]. The authors establish that bunching is robust in these multidimensional screening problems, even with very regular distributions of types. They consequently design a new technique, the sweeping procedure, for dealing with bunching in multidimensional contexts. This technique extends the ironing procedure of Mussa and Rosen to several dimensions.

MSC:

91B24	Microeconomic theory (price theory and economic markets)
91B42	Consumer behavior, demand theory

Keywords:

screening; nonlinear pricing; adverse selection; incentives; bundling