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

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Document pages: 22 pages

Abstract: We prove an existence result for the principal-agent problem with adverseselection 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 theprincipal s cost and the agents preferences. Our existence proof is simple andflexible enough to adapt to partial participation models as well as to the caseof type-dependent budget constraints.

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