The Generalized Informativeness Principle [report]

Pierre Chaigneau, Alex Edmans, Daniel Gottlieb
2014 unpublished
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.
doi:10.3386/w20729 fatcat:me6osldmyjfgjofv3c6vnhzvia