On the validity of the first-order approach with moral hazard and hidden assets

•If effort and assets are hidden, first-order conditions may not be sufficient.•Previous research has derived appealing restrictions that imply sufficiency.•These restrictions are valid for economies with a single hidden asset.•Appealing restrictions fail to achieve sufficiency when multiple assets are hidden.

With moral hazard and anonymous asset trade, first-order conditions need not characterize effort and portfolio choices. The standard procedure for establishing validity of the first-order approach in economies with one hidden asset is not fruitful when multiple assets are hidden.