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Incentive Problems With Unidimensional Hidden Characteristics: A Unified Approach
Author(s) -
Hellwig Martin F.
Publication year - 2010
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta7726
Subject(s) - pooling , incentive , type (biology) , distortion (music) , set (abstract data type) , distribution (mathematics) , mathematical economics , mathematics , jump , proposition , incentive compatibility , econometrics , economics , mathematical optimization , computer science , microeconomics , mathematical analysis , physics , artificial intelligence , geology , paleontology , amplifier , computer network , philosophy , bandwidth (computing) , epistemology , quantum mechanics , programming language
This paper develops a technique for studying incentive problems with unidimensional hidden characteristics in a way that is independent of whether the type set is finite, the type distribution has a continuous density, or the type distribution has both mass points and an atomless part. By this technique, the proposition that optimal incentive schemes induce no distortion “at the top” and downward distortions “below the top” is extended to arbitrary type distributions. However, mass points in the interior of the type set require pooling with adjacent higher types and, unless there are other complications, a discontinuous jump in the transition from adjacent lower types.