Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem
AbstractThis 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.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 154 (1998)
Issue (Month): 4 (December)
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Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Other versions of this item:
- Dominique Demougin & Claude Fluet, 1996. "Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem," Cahiers de recherche du DÃ©partement des sciences Ã©conomiques, UQAM 9602, Université du Québec à Montréal, Département des sciences économiques.
- D2 - Microeconomics - - Production and Organizations
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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