Optimal Bunching without Optimal Control

Nöldeke, Georg; Samuelson, Larry

doi:10.2139/ssrn.785804

Cited by 12 publications

(12 citation statements)

References 20 publications

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“…Third, the paper is related to the literature on principal-agent models with privately informed agents, illustrated by Spence (1977), Mussa and Rosen (1978), Maskin and Riley (1984), Guesnerie and Laffont (1984), Matthews and Moore (1987), Page (1992), Jullien (2000), Nöldeke and Samuelson (2007), and Hellwig (2010). The complications of 2 The renegotiation stage in Fudenberg and Tirole (1990) resembles a monopoly insurance problem in which the (random) effort chosen in the first stage is the agent's type.…”

Section: Related Literaturementioning

confidence: 99%

“…4 Jullien (2000) allows type-dependent reservation utility, and Nöldeke and Samuelson (2007) allow for common values, but each imposes quasilinear preferences (and focuses on particular aspects of the solution). Hellwig (2010) derives the no-pooling and efficiency-at-the-top results in a general principal-agent problem with wealth effects, using a nontrivial extension of the maximum principle.…”

Section: Related Literaturementioning

confidence: 99%

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Optimal Insurance with Adverse Selection

Chade

Schlee

2008

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We solve the principal-agent problem of a monopolist insurer selling to an agent whose riskiness (loss chance) is private information, a problem introduced in Stiglitz's (1977) seminal paper. Terms of use: Documents in EconStor mayFor an arbitrary type distribution, we prove several properties of optimal menus, such as efficiency at the top and downward distortions elsewhere. We show that these results extend beyond the insurance problem we emphasize. We also prove that the principal always prefers an agent facing a larger loss and prefers a poorer one if the agent's risk aversion decreases with wealth.For the standard case of a continuum of types and a smooth density, we show that, under the mild assumptions of a log-concave density and decreasing absolute risk aversion, the optimal premium is backward-S-shaped in the amount of coverage-first concave, then convex. This curvature result implies that quantity discounts are consistent with adverse selection in insurance, contrary to the conventional wisdom from competitive models.

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Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Optimal Insurance with Adverse Selection

Chade

Schlee

2008

SSRN Journal

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“…Nöldeke and Samuelson [11] develop an approach to ironing without optimal control, which is quite different from the present paper. Roughly put, they work with the inverse of the allocation rule.…”

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confidence: 65%

Ironing without control

Toikka

2011

Journal of Economic Theory

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“…This is a helpful insight because in general, it is difficult to find an optimal 17 The strict concavity of Z corresponds to Assumption 2 in Nöldecke and Samuelson (2007). Their other Assumption 1-that the V is quasi-convex in θ for all x-is trivially satisfied in our setting since V θ ≥ 0.…”

mentioning

confidence: 91%

“…For more general models of dynamic adverse selection, see Baron and Besanko (1984), Battaglini (2005), and Pavan et al (2014). 2 While the solutions we obtain may involve bunching, we show how an approach developed in Nöldecke and Samuelson (2007) can be applied in our setting, which does not require optimal control techniques to identify optimal bunches.…”

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confidence: 96%

Sequential versus static screening: An equivalence result

Krähmer

Strausz

2017

Games and Economic Behavior

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe show that every sequential screening model is equivalent to a standard text book static screening model. We use this result and apply well-established techniques from static screening to obtain solutions for classes of sequential screening models for which standard sequential screening techniques are not applicable. Moreover, we identify the counterparts of wellunderstood features of the static screening model in the corresponding sequential screening model such as the single-crossing condition and conditions that imply the optimality of deterministic schedules.

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Optimal Bunching without Optimal Control

Abstract: Abstract:This paper presents simple sufficient conditions under which optimal bunches in adverse-selection principal-agent problems can be characterized without using optimal control theory.

Cited by 12 publications

References 20 publications

Optimal Insurance with Adverse Selection

Optimal Insurance with Adverse Selection

Ironing without control

Sequential versus static screening: An equivalence result

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