On the value of randomization

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.

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Year of publication:	2014-05
Authors:	Gauthier, Stéphane ; Laroque, Guy
Institutions:	HAL
Subject:	second order conditions \| constrained optimization \| incentive constraints \| random contracts

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Extent:	application/pdf
Series:	Post-Print.
Type of publication:	Book / Working Paper
Notes:	View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00969344 Published, Journal of Economic Theory, 2014, 151, 493-507
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011025990