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.
Original language | English |
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Pages (from-to) | 743-755 |
Number of pages | 13 |
Journal | Games and Economic Behavior |
Volume | 113 |
DOIs | |
State | Published - 1 Jan 2019 |
Externally published | Yes |
Keywords
- Contract theory
- Informativeness principle
- Principal-agent model
ASJC Scopus subject areas
- Finance
- Economics and Econometrics