CARESSWorking Paper 01–01 Screening Through Bundling

This paper studies a class of multidimensional screening models where different type dimensions lie on the real line. The paper applies preservation results of totally positive functions to show that some critical properties of the distributions of asymmetric information parameters, such as increasing hazard rate, monotone likelihood ratio, and unimodality are preserved under convolution and/or composition. Under some general conditions, these preservation results also provide a natural ordering of alternative screening mechanisms. These results explain the optimality of bundling solutions in a wide range of economic models based on distributional features of the informational parameters involved. JEL: C00, D42, D82.