Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197180 
Year of Publication: 
2018
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 13 [Issue:] 3 [Publisher:] The Econometric Society [Place:] New Haven, CT [Year:] 2018 [Pages:] 1425-1481
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
Principal-agent models are pervasive in theoretical and applied economics, but their analysis has largely been limited to the ``first-order approach'' (FOA) where incentive compatibility is replaced by a first-order condition. This paper presents a new approach to solving a wide class of principal-agent problems that satisfy the monotone likelihood ratio property but may fail to meet the requirements of the FOA. Our approach solves the problem via tackling a max-min-max formulation over agent actions, alternate best responses by the agent, and contracts.
Subjects: 
Principal agent
moral hazard
solution method
JEL: 
D82
D86
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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