The First-Order Approach to Principal-Agent Problems
The first-order approach to principal-agent problems involves relaxing the constraint that the agent choose an action which is utility maximizing to require instead only that the agent choose an action at which his utility is at a stationary point. Although more mathematically tractable, this approa...
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| Veröffentlicht in: | Econometrica 1985-11, Vol.53 (6), p.1357-1367 |
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| container_title | Econometrica |
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| creator | Rogerson, William P. |
| description | The first-order approach to principal-agent problems involves relaxing the constraint that the agent choose an action which is utility maximizing to require instead only that the agent choose an action at which his utility is at a stationary point. Although more mathematically tractable, this approach is generally invalid. This paper identifies sufficient conditions--the monotone likelihood ratio condition and convexity of the distribution function condition--for the first-order approach to be valid. The Pareto-optimal wage contract is shown to be nondecreasing in output under these same conditions. |
| doi_str_mv | 10.2307/1913212 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0012-9682 |
| ispartof | Econometrica, 1985-11, Vol.53 (6), p.1357-1367 |
| issn | 0012-9682 1468-0262 |
| language | eng |
| recordid | cdi_proquest_journals_214656750 |
| source | Periodicals Index Online; JSTOR Mathematics & Statistics; JSTOR Archive Collection A-Z Listing |
| subjects | Convexity Distribution functions Expected utility Logical proofs Mathematical functions Moral hazard models Necessary conditions Optimization Principal agent problem Probability distributions Risk aversion Utility functions |
| title | The First-Order Approach to Principal-Agent Problems |
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