Clearly¿f (I i) will bind at « i solution, and using integracion by pares the
■ K?,%?■■.■>>■'•>•■ : . •
Ignoring the constraint» and assuming an interior solution (see footnote 22
, i in chapter 23) we get that the function x(i) which solves the problem must
To see that the so same in example 23.F.1 applies here as well. The SOC is satisfied sine« v~(*)<0.
Note that the highest valuation consumer is sec at the first-best level sine we get v'Cxii))! - c - 0, but all other eonsuaer types are distorted (this is a common result in the screening literature).
We will follow the analysis of example 23.F,2, and in particular the result of equation <23.F.9}
0-0, there exists 9 such that 0 for ail 0.€f#rtf). Therefor®, we ean m 1» X X w implement the result of (23.F*9) using a second-price sealed-bid auction with a reserve price of
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