On the generalized principal-agent problem: a comment

Sandrine Ollier ()
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Sandrine Ollier: CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE]

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Abstract: Faynzilberg and Kumar (Rev Econ Design 5(1):23–58, 2000) show that the usual Mirrlees–Rogerson conditions to validate the first-order approach in moral hazard agency models are no longer valid in the generalized agency case. They consider the risk-averse agent case and identify one set of technological conditions, where the production technology satisfies the linear distribution function condition in actions and types, that validates ex-ante the first-order approach. With the usefulness of their decomposition approach, we show that the first-order approach in the generalized agency case can be checked ex-ante under the Mirrlees–Rogerson conditions when the agent is risk-neutral but there is a binding limited liability constraint on the agent's wage.

Date: 2007
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Citations: View citations in EconPapers (3)

Published in Review of Economic Design, 2007, http://www.springerlink.com/content/x48p730722w21181/

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00447191

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