The informativeness principle without the first-order approach

Pierre Chaigneau, Alex Edmans, Daniel Gottlieb

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

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 languageEnglish
Pages (from-to)743-755
Number of pages13
JournalGames and Economic Behavior
Volume113
DOIs
StatePublished - 1 Jan 2019
Externally publishedYes

Keywords

  • Contract theory
  • Informativeness principle
  • Principal-agent model

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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