The No-Upward-Crossing Condition and the Moral Hazard Problem

We revisit the first-order approach to the moral hazard problem. Our fundamental claim is that in well-behaved problems, a condition we term No Upward Crossing (NUC) holds. We give foundations for NUC, and show how it facilitates analysis by both simplifying the relevant conditions and giving them an economic interpretation. We provide extensive analysis of sufficient conditions for the first-order approach for exponential families.