Monotonicity in optimal mechanisms in general quasi-linear environments with a continuum of types

Abstract

This paper provides conditions for the existence of optimal mechanism, in which the assignment rule takes the monotonic form and is determined independently of the transfer rule, in a principal-agent problem with a general quasi-linear environment. It is based on a complete characterization result of incentive-compatible mechanisms by monotonicity, envelope, and lower boundary individual rationality conditions. In particular, we present a general result for such an existence, which is also applicable to the scenarios without linear payoffs or regularity (lattice-related) conditions.