Screening Through Coordination

66 Pages Posted: 11 Jan 2018

Date Written: July 15, 2017

Abstract

In various screening environments agents have preferences that are independent of their type, making standard techniques infeasible. We show how a principal who faces multiple agents and whose preferences exhibit complementarities can benefit by coordinating her actions. Coordination delivers a payoff gain to the principal in states with many high-quality agents and accepts a payoff loss in states with many low-quality agents. Coordination sometimes results in strategic favoritism: the principal may favor agents who are unambiguously inferior. While this behavior is often attributed to biases, we show that a rational principal optimally pursues this strategy if complementarities are sufficiently high.

Keywords: Mechanism Design, Screening, Coordination, Supermodularity

JEL Classification: D82, D23

Suggested Citation

Antic, Nemanja and Steverson, Kai, Screening Through Coordination (July 15, 2017). Available at SSRN: https://ssrn.com/abstract=3098376 or http://dx.doi.org/10.2139/ssrn.3098376

Nemanja Antic

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Kai Steverson (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

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