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Distributions for the first-order approach to principal-agent problems

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Summary.

The first-order approach is a technical shortcut widely used in agency problems. The best known set of sufficient conditions for its validity are due to Mirrlees and Rogerson and require that the distribution function is convex in effort and has a likelihood ratio increasing in output. Only one nontrivial example was so far known to satisfy both properties. This note provides two rich families of examples displaying both properties.

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Authors and Affiliations

  1. Department of Applied Mathematics, University of Venice, 30135 Venice, ITALY (e-mail: licalzi@unive.it) , , , , , , IT

    Marco LiCalzi

  2. BETA-Theme, Louis Pasteur University, 67085 Strasbourg, FRANCE (e-mail: spaeter@cournot.u-strasbg.fr) , , , , , , FR

    Sandrine Spaeter

Authors
  1. Marco LiCalzi
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  2. Sandrine Spaeter
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Additional information

Received: December 4, 2000; revised version: December 10, 2001

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LiCalzi, M., Spaeter, S. Distributions for the first-order approach to principal-agent problems. Econ Theory 21, 167–173 (2003). https://doi.org/10.1007/s00199-001-0250-y

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  • DOI: https://doi.org/10.1007/s00199-001-0250-y

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