Discussion paper

DP10279 The Generalized Informativeness Principle

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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Citation

Edmans, A and P Chaigneau (2014), ‘DP10279 The Generalized Informativeness Principle‘, CEPR Discussion Paper No. 10279. CEPR Press, Paris & London. https://cepr.org/publications/dp10279