Convolution and composition of totally positive random variables in economics

Miravete, Eugenio J. (2011) Convolution and composition of totally positive random variables in economics. Journal of Mathematical Economics, 47 (4-5). pp. 479-490. ISSN 0304-4068

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Abstract

This paper studies a class of multidimensional screening models where different type dimensions can be aggregated into a single-dimensional sufficient statistic. The paper applies results of totally positive functions to show that some critical properties of distributions of asymmetric information parameters, such as increasing hazard rate, monotone likelihood ratio, and single-peakedness are preserved under convolution or composition. Under some general conditions, these invariance results also provide a natural ordering of alternative screening mechanisms. I illustrate how these preservation results provide a unifying framework to interpret several contributions in economic models of adverse selection, moral hazard, and voting.

Item Type:	Article
Uncontrolled Keywords:	total positivity,log-concavity,basic composition formula,favorableness
Faculty \ School:	Faculty of Social Sciences > School of Economics
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Industrial Economics Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User:	Pure Connector
Date Deposited:	13 Jan 2017 00:06
Last Modified:	12 May 2023 00:28
URI:	https://ueaeprints.uea.ac.uk/id/eprint/62038
DOI:	10.1016/j.jmateco.2011.06.008

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