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Information and delay in an agency model

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  • Mikhail Drugov
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    Abstract

    This article studies how delay in contracting depends on an exogenous signal. The agent whose cost is his private information may produce in the first period or be delayed until the second period. A signal about the cost of the agent is available between the two periods. The quality of the good can vary; in the benchmark case of no signal, the principal offers the standard Baron-Myerson contract and there is no delay. Delay is determined by the considerations at the margin and may increase or decrease with a better signal. The value of information can be negative, as a better signal may aggravate the principal's commitment problem. A better signal may also increase the agent's rent and decrease social welfare. Copyright (c) 2010, RAND.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1756-2171.2010.00113.x
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    Bibliographic Info

    Article provided by RAND Corporation in its journal The RAND Journal of Economics.

    Volume (Year): 41 (2010)
    Issue (Month): 3 ()
    Pages: 598-615

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    Handle: RePEc:bla:randje:v:41:y:2010:i:3:p:598-615

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    References

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    Cited by:
    1. Raffaele Fiocco & Roland Strausz, 2012. "Consumer Standards as a Strategic Device to Mitigate Ratchet Effects in Dynamic Regulation," SFB 649 Discussion Papers SFB649DP2012-055, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    2. Raffaele Fiocco & Roland Strausz, 2014. "Consumer Standards as a Strategic Device to Mitigate Ratchet Effects in Dynamic Regulation," CESifo Working Paper Series 4758, CESifo Group Munich.

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