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Title: The Generalized Informativeness Principle

Author(s): Pierre Chaigneau, Alex Edmans and Daniel Gottlieb

Publication Date: December 2014

Keyword(s): Contract theory, informativeness principle. and principal-agent model

Programme Area(s): Financial Economics and Labour Economics

Abstract: This paper shows that the informativeness principle, as originally formulated by Holmstrom (1979), does not hold if the first-order approach is invalid. We introduce a "generalized informativeness principle" that takes into account non-local incentive constraints and holds generically, even without the first-order approach. Our result holds for both separable and non-separable utility functions.

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Bibliographic Reference

Chaigneau, P, Edmans, A and Gottlieb, D. 2014. 'The Generalized Informativeness Principle'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10279