Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2022

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Costly Multidimensional Screening

Frank Yang*

Last modified: 2022-04-17


A screening instrument is costly if it is socially wasteful and productive otherwise. A principal screens an agent with multidimensional private information and quasilinear preferences that are additively separable across two components: a one-dimensional productive component and a multidimensional costly component. Can the principal improve upon simple one-dimensional mechanisms by also using the costly instruments? We show that if the agent has preferences between the two components that are positively correlated in a suitably defined sense, then simply screening the productive component is optimal. The result holds for general type and allocation spaces, and allows for nonlinear and interdependent valuations. We discuss applications to optimal regulation, labor market screening, and monopoly pricing.

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