The informativeness principle without the first-order approach

Pierre Chaigneau, Alex Edmans and Daniel Gottlieb ()

Games and Economic Behavior, 2019, vol. 113, issue C, 743-755

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 (search for similar items in EconPapers)
JEL-codes: D86 J33 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:113:y:2019:i:c:p:743-755

DOI: 10.1016/j.geb.2018.08.006

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