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Information Control in the Principal-Agent Problem

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  • Sobel, Joel

Abstract

This paper compares the principal's payoff in agency models under different assumptions about the agent's access to information. The agent may make decisions before (is uninformed) or after (is informed) learning the state of nature. When there are two possible outcomes, the principal typically prefers informed to uninformed agents, whether the agent receives the information before or after contracting. This result is false when there are more than two outcomes. Conditions under which a principal prefers one agent to another, when the agents differ only in their disutility of effort, are also given. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Sobel, Joel, 1993. "Information Control in the Principal-Agent Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 259-269, May.
    • Handle: RePEc:ier:iecrev:v:34:y:1993:i:2:p:259-69
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