Holmstrom's theorem, in economics, is an impossibility result attributed to Bengt Holmstrom showing that no incentive scheme for a team of agents can simultaneously guarantee that total payments to the team equal total output, that the scheme has a Nash equilibrium, and that the resulting outcome is Pareto efficient.
Facts
Statementno incentive system for a team of agents can make all of the following true: income equals outflow, the system has a Nash equilibrium, and the system is Pareto efficient 2 Classification
Statement Form Connections
Sources
1. Wikipedia: Holmström's theorem
WikipediaLead section, statement-form referenceQuote, Lead section, statement-form reference
In economics, Holmström's theorem is an impossibility theorem or trilemma attributed to Bengt R.
2. Holmstrom's theorem - Wikipedia
Lead section
Holmström proving that no incentive system for a team of agents can make all of the following true: Income equals outflow (the budget balances), The system has a Nash equilibrium, and The system is Pareto efficient.
References section
Bengt Holmstrom, "Moral Hazard in Teams", The Bell Journal of Economics 13, no. 2 (1982), pp. 324-340.
In Group: Economic Theory, Lead paragraph
In economics, Holmström's theorem is an impossibility theorem or trilemma attributed to Bengt R.
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