The informativeness principle without the first-order approach
Journal
Games and Economic Behavior
Subject
Finance
Publishing details
Authors / Editors
Chaigneau P; Edmans A; Gottlieb D
Biographies
Publication Year
2019
Abstract
Holmström (1979) provides a condition for a signal to have positive value assuming the validity of the first-order approach. This paper extends Holmström’s analysis to settings where the first-order approach may not hold. We provide a new condition for a signal to have positive value that takes non-local incentive constraints into account and holds generically. Our condition is the weakest condition possible in the absence of restrictions on the utility function.
Keywords
Contract theory; Principal-agent model; Informativeness principle
Available on ECCH
No
