Ironing without control
Author(s)Toikka, Juuso T.
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I extend Myersonʼs [R. Myerson, Optimal auction design, Math. Oper. Res. 6 (1981) 58–73] ironing technique to more general objective functions. The approach is based on a generalized notion of virtual surplus which can be maximized pointwise even when the monotonicity constraint implied by incentive compatibility binds. It is applicable to quasilinear principal-agent models where the standard virtual surplus is weakly concave in the allocation or appropriately separable in the allocation and type. No assumptions on allocation rules are required beyond monotonicity.
DepartmentMassachusetts Institute of Technology. Department of Economics
Journal of Economic Theory
Toikka, Juuso. “Ironing Without Control.” Journal of Economic Theory 146, no. 6 (November 2011): 2510–2526.
Author's final manuscript