Publication Date: February 2017
Revision Date: February 2020
We study the classic sequential screening problem in the presence of ex-post participation constraints. We establish necessary and suﬀicient conditions that determine when the optimal selling mechanism is either static or sequential. In the static contract, the buyers are not screened with respect to their interim type and the object is sold at a posted price. In the sequential contract, the buyers are screened with respect to their interim type and a menu of quantities is oﬀered.
We completely characterize the optimal sequential contract with binary interim types and a continuum of ex-post values. Importantly, the optimal sequential contract randomizes the allocation of the low-type buyer and awards a deterministic allocation to the high type buyer. Finally, we provide additional results for the case of multiple interim types.
Keywords: Sequential screening, Ex-post participation constraints, Static contract, Sequential contract
JEL Classification Codes: C72, D82, D83CFDP 2078CFDP 2078RCFDP 2078R2CFDP 2078R3