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Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem

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  • Dominique Demougin
  • Claude Fluet

Abstract

This paper analyzes the efficient use of information in an agency relationship with moral hazard, when parties are risk-neutral. We show that, given an arbitrary information system, all relevant information from a mechanism-design point of view can be summarized by a binary statistic. We then show that this allows a complete ordering of information systems for the risk-neutral agency problem. These results are obtained under a weak convexity condition which does not rely on an exogenous ordering on signal sets. The condition is shown to be more general than existing requirements for justifying the first-order approach.

Suggested Citation

  • Dominique Demougin & Claude Fluet, 1998. "Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(4), pages 622-622, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199812)154:4_622:mssitr_2.0.tx_2-t
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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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