- contract theory •
- principal-agent model •
- Informativeness principle
Holmström (1979) provides a condition for a signal to have positive value assuming the validity of the first-order approach. This paper extends Holmström's analysis to settings where the first-order approach may not hold. We provide a new condition for a signal to have positive value that takes non-local incentive constraints into account and holds generically.
Our condition is the weakest condition possible in the absence of restrictions on the utility function.