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

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Author Info
Marco LiCalzi
Sandrine Spaeter

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Abstract

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. Copyright Springer-Verlag Berlin Heidelberg 2003

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File URL: http://hdl.handle.net/10.1007/s00199-001-0250-y
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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 21 (2003)
Issue (Month): 1 (01)
Pages: 167-173
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Handle: RePEc:spr:joecth:v:21:y:2003:i:1:p:167-173

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Related research
Keywords: Keywords and Phrases: Principal-agent problem; First-order approach; Monotone likelihood ratio; Convexity in effort.; JEL Classification Numbers: D82.;

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  2. Quinzii, Martine & Magill, Michael, 2008. "Normative Properties of Stock Market Equilibrium with Moral Hazard," Working Papers 08-2, University of California at Davis, Department of Economics. [Downloadable!]
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  3. André SCHMITT & Sandrine SPAETER, 2002. "Improving the Prevention of Environmental Risks with Convertible Bonds," Working Papers of BETA 2002-14, Bureau d'Economie Théorique et Appliquée, ULP, Strasbourg. [Downloadable!]
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This page was last updated on 2009-11-25.

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