On the validity of the first-order approach with moral hazard and hidden assets

Giuseppe Bertola and Winfried Koeniger

Economics Letters, 2014, vol. 124, issue 3, 402-405

Abstract: With moral hazard and anonymous asset trade, first-order conditions need not characterize effort and portfolio choices. The standard procedure for establishing validity of the first-order approach in economies with one hidden asset is not fruitful when multiple assets are hidden.

Keywords: Hidden action; Hidden assets; Principal agent; First-order approach (search for similar items in EconPapers)
JEL-codes: D81 D82 E21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:124:y:2014:i:3:p:402-405

DOI: 10.1016/j.econlet.2014.06.030

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