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Ranking of Information Systems in Agency Models: An Integral Condition

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Abstract

We provide an integral condition for the ranking of general information systems in the agency problem. The condition has a straightforward economic interpretation in terms of the sensitivity of a cumulative distribution with respect to the agent's effort. The proposed criterion is shown to be equivalent to Kim's preserving spread condition on the likelihood ratio distributions Nous présentons un critère intégral pour le classement des systèmes d'information dans les problèmes principal-agent. Le critère proposé a une interprétation intuitive en ce qu'il caractérise la sensibilité d'une fonction de répartition par rapport au niveau d'effort de l'agent. Nous montrons que ce critère est équivalent au critère de Kim défini sur la base d'un accroissement de risque des ratios de vraisemblance.

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  • Dominique Demougin & Claude Fluet, 1998. "Ranking of Information Systems in Agency Models: An Integral Condition," Cahiers de recherche CREFE / CREFE Working Papers 70, CREFE, Université du Québec à Montréal.
  • Handle: RePEc:cre:crefwp:70
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    1. 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.
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    Cited by:

    1. Xie, Jia, 2011. "Ranking of signals in multitask agency models," Economics Letters, Elsevier, vol. 112(1), pages 82-84, July.
    2. Marie-Cécile Fagart & Claude Fluet, 2009. "Liability insurance under the negligence rule," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 486-508.
    3. Jörg Budde, 2005. "Information in tournaments under limited liability," Bonn Econ Discussion Papers bgse21_2005, University of Bonn, Germany.
    4. Bernhard Eckwert & Itzhak Zilcha, 2007. "The Effect of Better Information on Income Inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 287-307, August.
    5. Marie-Cécile Fagart & Bernard Sinclair-Desgagné, 2002. "Auditing Policies and Information Systems in Principal-agent Analysis," Cahiers de recherche 02-02, HEC Montréal, Institut d'économie appliquée.
    6. Jörg Budde & Matthias Kräkel, 2011. "Limited liability and the risk–incentive relationship," Journal of Economics, Springer, vol. 102(2), pages 97-110, March.
    7. Marie-Cécile Fagart & Bernard Sinclair-Desgagné, 2007. "Ranking Contingent Monitoring Systems," Management Science, INFORMS, vol. 53(9), pages 1501-1509, September.
    8. Budde, Jörg, 2009. "Information in tournaments under limited liability," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 59-72, January.
    9. Dominique Demougin & Claude Fluet, 1999. "Costly Sanctions and the Maximum Penalty Principle," Cahiers de recherche CREFE / CREFE Working Papers 100, CREFE, Université du Québec à Montréal.
    10. Fluet, Claude, 2010. "Liability rules under evidentiary uncertainty," International Review of Law and Economics, Elsevier, vol. 30(1), pages 1-9, March.
    11. Dominique Demougin & Claude Fluet, 2000. "Prepondeance of the Evidence: Tort Rules and the Efficient Standard of Proof," Cahiers de recherche CREFE / CREFE Working Papers 120, CREFE, Université du Québec à Montréal.

    More about this item

    Keywords

    agency problem; information systems; likelihood ratio; mean preserving spread criterion; integral criterion;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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