Existence of solutions to principal–agent problems with adverse selection under minimal assumptions

Abstract

We prove an existence result for the principal–agent problem with adverse selection under general assumptions on preferences and allocation spaces. Instead of assuming that the allocation space is finite-dimensional or compact, we consider a more general coercivity condition which takes into account the principal’s cost and the agents’ preferences. Our existence proof is simple and flexible enough to adapt to partial participation models as well as to the case of type-dependent budget constraints.