Abstract
We define and explore no-upward-crossing (NUC), a condition satisfied by every parameterized family of distributions commonly used in economic applications. Under smoothness assumptions, NUC is equivalent to log-supermodularity of the negative of the derivative of the distribution with respect to the parameter. It is characterized by a natural monotone comparative static and is central in establishing quasi-concavity in a family of decision problems. As an application, we revisit the first-order approach to the moral-hazard problem. NUC simplifies the relevant conditions for the validity of the first-order approach and gives them an economic interpretation. We provide extensive analysis of sufficient conditions for the first-order approach for exponential families.
Original language | English (US) |
---|---|
Pages (from-to) | 445-476 |
Number of pages | 32 |
Journal | Theoretical Economics |
Volume | 15 |
Issue number | 2 |
DOIs | |
State | Published - May 1 2020 |
Keywords
- D81
- D86
- Log-supermodularity
- first-order approach
- moral hazard
- quasi-concavity
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)