Thomas A. Weber     (Chair of Operations, Economics and Strategy Swiss Federal Institute of Technology, Lausanne, Switzerland)


We provide a technique for constructing optimal multiattribute screening contracts in a general setting with one-dimensional types based on necessary optimality conditions. Our approach allows for type-dependent participation constraints and arbitrary risk proles. As an example we discuss optimal insurance contracts.


Asymmetric Information, Incentive Contracting, Maximum Principle, Nonlinear Pricing

Full Text:



  1. Mirrlees, J.A. An exploration in the theory of optimal income taxation // Rev. Econ. Stud. 1971. Vol. 38, no. 2. P. 175–208.
  2. Baron, D.P., Myerson, R.B. Regulating a monopolist with unknown costs // Econometrica. 1982. Vol. 50, no. 4. P. 911–930.
  3. Mirman, L.J., Sibley, D. Optimal nonlinear prices for multiproduct monopolies // Bell J. Econ. 1980. Vol. 11, no. 2. P. 659–670.
  4. Mussa, M., Rosen, S. Monopoly and product quality // J. Econ. Theory. 1978. Vol. 18, no. 2. P. 301–317.
  5. Guesnerie, R., Laont, J.-J. A complete solution to a class of principal-agent problems with an application to the control of a self-managed rm // J. Public Econ. 1984. Vol. 25, no. 3. P. 329–369.
  6. Matthews, S., Moore, J. Monopoly provision of quality and warranties: an exploration in the theory of multidimensional screening // Econometrica. 1987. Vol. 55, no. 2, P. 441–467.
  7. Pontryagin, L.S., Boltyanskii, V.G., Gamkrelidze, R.V., Mishchenko, E.F. The mathematical theory of optimal processes, New York: Wiley Interscience, 1962. 360 p.
  8. Aseev, S. Methods of regularization in nonsmooth problems of dynamic optimization // J. Math. Sci. 1999. Vol. 94, no. 3, P. 1366–1393.
  9. Hicks, J.R. Value and capital, Oxford: Clarendon Press, 1939. 331 p.
  10. Weber, T.A. Hicksian welfare measures and the normative endowment effect // Am. Econ. J.: Microecon. 2010. Vol. 2, no. 4. P. 171–194.
  11. Weber, T.A. Screening with externalities. Working Paper, Stanford University, 2005.
  12. Gibbard, A. Manipulation of voting schemes: a general result // Econometrica. 1973. Vol. 41, no. 4. P. 587–601.
  13. Myerson, R.B. Incentive compatibility and the bargaining problem // Econometrica. 1979. Vol. 47, no. 1. P. 61–74.
  14. Rudin, W. Principles of mathematical analysis (3rd edition). New York: McGraw-Hill, 1976. 342 p.
  15. Jayne, J.E., Rogers, C.A. Selectors. Princeton: Princeton University Press, 2002. 167 p.
  16. Laffont, J.-J. The economics of uncertainty and information. Cambridge: MIT Press, 1989. 289 p.
  17. Stiglitz, J.E. Monopoly, non-linear pricing and imperfect information: the insurance market // Rev. Econ. Stud. 1977. Vol. 44, no. 3. P. 407–430.
  18. Weber, T.A. Global optimization on an interval // J. Optimiz. Theory App. 2016. Forthcoming DOI: 10.1007/s10957-016-1006-y
  19. Arutyunov, A.V. Optimality conditions: abnormal and degenerate problems. Dordrecht: Kluwer, 2000. 299 p.
  20. Weber, T.A. Optimal control theory with applications in economics. Cambridge: MIT Press, 2011. 360 p. (Preface by A.V. Kryazhimskiy)
  21. Gelfand, I.M., Fomin, S.V. Calculus of variations. Englewood-Clis: Prentice-Hall, 1963. 240 p.
  22. Kolmogorov, A.N., Fomin, S.V. Elements of the theory of functions and functional analysis, parts I&II. Rochester: Graylock Press, 1957. 288 p.
  23. Megginson, R.E. An introduction to Banach space theory. New York: Springer, 1998. 596 p.
  24. Dunford, N., Schwartz, J.T. Linear operators, part I: general theory. New York: Wiley Interscience, 1958. 858 p.
  25. Milyutin, A.A., Osmolovskii, N.P. Calculus of variations and optimal control. Providence: American Mathematical Society, 1998. 372 p.
  26. Zorich, V.A. Mathematical analysis, vol. I. New York: Springer, 2004. 574 p.
  27. Kirillov, A.A., Gvishiani, A.D. Theorems and problems in functional analysis. New York: Springer, 1982. 347 p.
  28. Taylor, A.E. General theory of functions and integration. New York: Blaisdell Publishing, 1965. 437 p.
  29. Giaquinta, M., Modica, G., Soucek, J. Cartesian currents in the calculus of variations, vol. I. New York: Springer, 1998. 711 p.
  30. Riesz, F., Sz.-Nagy, B. Functional analysis, New York: Ungar Publishing, 1955. 491 p.
  31. Schechter, M. Principles of functional analysis (2nd edition). Providence: American Mathematical Society, 2002. 425 p.

DOI: http://dx.doi.org/10.15826/umj.2016.2.007

Article Metrics

Metrics Loading ...


  • There are currently no refbacks.