Munich Personal RePEc Archive

All solution graphs in multidimensional screening

Kokovin, Sergey and Nahata, Babu and Zhelobodko, Evgeny (2010): All solution graphs in multidimensional screening. Forthcoming in: Journal of New Economic Association, Russia

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Abstract

We study general discrete-types multidimensional screening without any noticeable restrictions on valuations, using instead epsilon-relaxation of the incentive-compatibility constraints. Any active (becoming equality) constraint can be perceived as "envy" arc from one type to another, so the set of active constraints is a digraph. We find that: (1) any solution has an in-rooted acyclic graph ("river"); (2) for any logically feasible river there exists a screening problem resulting in such river. Using these results, any solution is characterized both through its spanning-tree and through its Lagrange multipliers, that can help in finding solutions and their efficiency/distortion properties.

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