I study a principal-agent model in which the agent collects information and then chooses a verifiable action. I show that the principal can find it desirable to constrain the agent's action set even though there is no disagreement about the ranking of actions "ex post". The elimination or penalization of "intermediate" actions, which are optimal when information is poor, improves incentives for information collection. I characterize optimal action sets when the agent is infinitely risk averse with respect to income shocks and optimal incentive schemes when the agent is risk neutral. Copyright The Review of Economic Studies Limited, 2005.
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Volume (Year): 72 (2005) Issue (Month): 4 (October) Pages: 1173-1198 Download reference. The following formats are available: HTML
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