The Scope of Sequential Screening with Ex-Post Participation Constraints

71 Pages Posted: 9 Apr 2020 Last revised: 22 Jul 2020

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Francisco Castro

University of California, Los Angeles (UCLA) - Anderson School of Management

Gabriel Y. Weintraub

Stanford Graduate School of Business, Stanford University

Multiple version iconThere are 6 versions of this paper

Date Written: April 16, 2020

Abstract

We study the classic sequential screening problem in the presence of ex post participation constraints. We establish necessary and sufficient conditions that determine when the optimal selling mechanism is either static or sequential. In the static contract, the buyers are not screened with respect to their interim type and the object is sold at a posted price. In the sequential contract, the buyers are screened with respect to their interim type and a menu of quantities is offered.

We completely characterize the optimal sequential contract with binary interim types and a continuum of ex post values. Importantly, the optimal sequential contract randomizes the allocation of the low-type buyer and awards a deterministic allocation to the high type buyer. Finally, we provide additional results for the case of multiple interim types.

Keywords: Sequential screening, ex post participation constraints, static contract, sequential contract

JEL Classification: C72, D82, D83

Suggested Citation

Bergemann, Dirk and Castro, Francisco and Weintraub, Gabriel Y., The Scope of Sequential Screening with Ex-Post Participation Constraints (April 16, 2020). Cowles Foundation Discussion Paper No. 2078R4, Available at SSRN: https://ssrn.com/abstract=3569697 or http://dx.doi.org/10.2139/ssrn.3569697

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-3592 (Phone)
203-432-2128 (Fax)

HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Francisco Castro

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
6465528479 (Phone)
90095 (Fax)

Gabriel Y. Weintraub

Stanford Graduate School of Business, Stanford University ( email )

Stanford, CA 94305
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
82
Abstract Views
639
Rank
156,977
PlumX Metrics