Screening for Choice Sets

TL;DR

This paper analyzes a strategic screening problem where an agent selectively discloses feasible technologies to a principal, deriving optimal mechanisms that balance information revelation and utility promises under set inclusion ordering.

Contribution

It characterizes the structure of optimal screening mechanisms in technology disclosure with ordered sets, revealing utility monotonicity and segmentation properties.

Findings

Optimal utility promises are weakly increasing with reported sets.

Mechanisms either match complete information utility or have piecewise constant segments.

Number of constant segments is bounded by the number of downward segments in the benchmark.

Abstract

We study a screening problem in which an agent privately observes a set of feasible technologies and can strategically disclose only a subset to the principal. The principal then takes an action whose payoff consequences for both players are publicly known. Under the assumption that the possible technology sets are ordered by set inclusion, we show that the optimal mechanism promises the agent a utility that is weakly increasing as the reported set expands, and the choice of the principal maximizes her own utility subject to this promised utility constraint. Moreover, the optimal promised utility either coincides with the agent's utility under the complete information benchmark or remains locally constant, with the number of constant segments bounded by the number of downward-sloping segments of the complete information benchmark.