On the value of randomization

Stephane Gauthier and Guy Laroque

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: The paper identifies a necessary and sufficient condition for a deterministic local optimum to be locally improved upon by a stochastic deviation. When this condition is satisfied, a method to construct the stochastic allocations that increase the objective is provided. This technique is applied to a number of adverse selection and moral hazard problems.

Keywords: second order conditions; constrained optimization; incentive constraints; random contracts (search for similar items in EconPapers)
Date: 2014-05
Note: View the original document on HAL open archive server: https://hal.science/hal-00969344v1
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Citations: View citations in EconPapers (20)

Published in Journal of Economic Theory, 2014, 151, pp.493-507. ⟨10.1016/j.jet.2014.02.006⟩

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Related works:
Journal Article: On the value of randomization (2014)
Working Paper: On the value of randomization (2014)
Working Paper: On the value of randomization (2014)
Working Paper: On the value of randomization (2014)
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Working Paper: On the value of randomization (2011)
Working Paper: On the value of randomization (2011)
Working Paper: On the value of randomization (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-00969344

DOI: 10.1016/j.jet.2014.02.006

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