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Can CDFC and MLRP Conditions Be Both Satisfied for a Given Distribution?

Author

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  • Patrice Loisel

    (INRA, UMR 729 MISTEA, Montpellier, France)

Abstract

In principal-agent problem, the first-order approach is frequently used. To insure the validity of the approach the Monotone Likelihood Ratio Property and the Convexity of the Distribution Function Condition are requested. While the former property is satisfied by most of the distributions, this is not the case for the second property. We present two families of distributions for which the properties are satisfied. The first family includes as special cases the distributions that were previously introduced by various authors. The second family includes new distributions.

Suggested Citation

  • Patrice Loisel, 2013. "Can CDFC and MLRP Conditions Be Both Satisfied for a Given Distribution?," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 7(3), pages 135-145, November.
    • Handle: RePEc:fau:aucocz:au2013_135
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    References listed on IDEAS

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    Cited by:

    1. Jiong Gong & Ping Jiang & Xiaochuan Xing, 2018. "Compensation Convexity without Utility Restriction," Australian Economic Papers, Wiley Blackwell, vol. 57(3), pages 238-249, September.

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    More about this item

    Keywords

    Monotone Likelihood Ratio Property; Convex Distribution Function Condition; incentive contract; first-order approach; moral hazard;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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