The value of information in a principal–agent model with moral hazard: The ex post contracting case
AbstractIn a principal–agent model with moral hazard, a signal about the principalʼs technology — the stochastic mapping from the agentʼs action to the outcome — is observed before the contract is offered. The signal is either uninformative (null information), informative and observed only by the principal (private information), or also observed by the agent (public information). We show that, from an ex ante standpoint (before the signal is observed): (i) the agent prefers private to both null and public information; (ii) the principal sometimes prefers null to both private and public information; and (iii) when the principal prefers public to null information, she prefers public to private information, whereas the agent prefers private to public information. In this last situation, we also show that (iv) for any separating equilibrium with private information, there exists a contract with public information that both strictly prefer.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 74 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/622836
Moral hazard; Principal–agent; Informed principal; Information; Technology; Ex post contracting;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
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