Progressive screening: Long-Term contracting with a privately known stochastic process

Research output: Contribution to journalArticlepeer-review

21 Scopus citations


We examine a model of long-term contracting in which the buyer is privately informed about the stochastic process by which her value for a good evolves. In addition, the realized values are also private information. We characterize a class of environments in which the profit-maximizing long-term contract offered by a monopolist takes an especially simple structure: we derive sufficient conditions on primitives under which the optimal contract consists of a menu of deterministic sequences of static contracts. Within each sequence, higher realized values lead to greater quantity provision; however, an increasing proportion of buyer types are excluded over time, eventually leading to inefficiently early termination of the relationship. Moreover, the menu choices differ by future generosity, with more costly (up front) plans guaranteeing greater quantity provision in the future. Thus, the seller screens process information in the initial period and then progressively screens across realized values so as to reduce the information rents paid in future periods.

Original languageEnglish (US)
Article numberrds021
Pages (from-to)1-34
Number of pages34
JournalReview of Economic Studies
Issue number1
StatePublished - Jan 2013


  • Asymmetric information
  • Dynamic incentives
  • Dynamic mechanism design
  • Long-term contracts
  • Sequential screening

ASJC Scopus subject areas

  • Economics and Econometrics


Dive into the research topics of 'Progressive screening: Long-Term contracting with a privately known stochastic process'. Together they form a unique fingerprint.

Cite this