Battaglini, Marco; Lamba, Rohit - In: Theoretical Economics 14 (2019) 4, pp. 1435-1482
We explore the conditions under which the “first‐order approach” (FO approach) can be used to characterize profit maximizing contracts in dynamic principal–agent models. The FO approach works when the resulting FO‐optimal contract satisfies a particularly strong form of monotonicity in...