Published July 26, 2021 | Version v1
Journal article Open

Participation constraints in discontinuous adverse selection models

  • 1. Paris School of Economics
  • 2. University of Chicago

Description

We present a set of necessary and sufficient conditions for a class of optimal control problems with pure state constraints for which the objective function is linear in the state variable but the objective function is only required to be upper semi-continuous in the control variable. We apply those conditions to economic environments in contract theory where discontinuities in objectives prevail. Examples of applications include nonlinear pricing of digital goods and nonlinear pricing under competitive threat.

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Participation-constraints-in-discontinuous-adverse-selection-models.pdf

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Additional details

Identifiers

DOI
10.3982/TE3030
Other
oai:uchicago.tind.io:5142

UChicago Information

Division(s)
Booth School of Business
Department(s)
Microeconomics