On the value of randomization

Article dans une revue: The paper identifies a necessary and sufficient condition for a deterministic local optimum to be locally improved upon by a stochastic deviation. When this condition is satisfied, a method to construct the stochastic allocations that increase the objective is provided. This technique is applied to a number of adverse selection and moral hazard problems.

Auteur(s)

Stéphane Gauthier, Guy Laroque

Revue
  • Journal of Economic Theory
Date de publication
  • 2014
Mots-clés JEL
C61 D82 D86 H21
Mots-clés
  • Second order conditions
  • Constrained optimization
  • Incentive constraints
  • Random contracts
Pages
  • 493-507
Version
  • 1
Volume
  • 151