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Endogenous information and stochastic contracts

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  • Terstiege, Stefan
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    Abstract

    A growing literature analyzes revenue-maximizing contracts for situations in which agents can acquire private information before they decide whether to join the contract. It is conjectured that the results also apply to the more natural scenario where information can be acquired either before or after signing. This paper shows that, in fact, the latter scenario is more favorable for the principal. Using stochastic contracts, she can induce information acquisition with some probability and yet appropriate the generated surplus.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0899825612001133
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    Bibliographic Info

    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 76 (2012)
    Issue (Month): 2 ()
    Pages: 535-547

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    Handle: RePEc:eee:gamebe:v:76:y:2012:i:2:p:535-547

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    Web page: http://www.elsevier.com/locate/inca/622836

    Related research

    Keywords: Principal agent; Information acquisition; Stochastic contracts;

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    References

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    Cited by:
    1. Terstiege, Stefan, 2013. "Precontractual Investigation and Sequential Screening," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 429, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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