Bengt R. Holmstrom
Abstract
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The role of imperfect information in a principal-agent relationship subject to moral hazard is considered.A necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived, and a characterization of the optimal use of such information is given.
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The role of imperfect information in a principal-agent relationship subject to moral hazard is considered.A necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived, and a characterization of the optimal use of such information is given.
Key concepts: Observability, Moral hazard, Economics, Mathematical economics, Microeconomics, Mathematics, Applied mathematics, Incentive