Download This PaperThe Informativeness Principle Without the First-Order Approach
Games and Economic Behavior, Forthcoming
European Corporate Governance Institute (ECGI) - Finance Working Paper No. 444/2014
39 Pages Posted: 19 Nov 2014 Last revised: 28 Aug 2018
There are 3 versions of this paper
The Informativeness Principle Without the First-Order Approach
The Generalized Informativeness Principle
The Generalized Informativeness Principle
Date Written: August 15, 2018
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
JEL Classification: D86, J33
Suggested Citation: Suggested Citation
Pierre Chaigneau
Queen's University ( email )
Smith School of Business - Queen's University
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Daniel Gottlieb
London School of Economics ( email )
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