Information and experimentation in short-term contracting
AbstractThe impact of information dissemination and experimentation on dynamic adverse selection in noisy agency relationships is examined. Significant deviations in terms of equilibrium actions and payments occur, when compared to deterministic environments. Information dissipates slowly, so payments to agents who stand to lose informational rents over time are lower than compared to deterministic settings. Moreover, the principal manipulates the agent's actions to affect the informativeness of the signal. Thus, the principal trades-off lower initial payments with higher informational rents later. Simultaneously, the principal manipulates the signal distribution to enhance his ability to learn about the agent's type.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 19 (2002)
Issue (Month): 2 ()
Note: Received: February 15, 2000; revised version: August 29, 2000
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Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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- Leonard J. Mirman & Thomas D. Jeitschko & Egas Salgueiro, 2002.
"The simple analytics of information and experimentation in dynamic agency,"
Springer, vol. 19(3), pages 549-570.
- Thomas D. Jeitschko & Leonard J. Mirman & Egas Salgueiro, 2004. "The simple analytics of information and experimentation in dynamic agency," Working Papers de Economia (Economics Working Papers) 12, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
- Neelam Jain & Thomas D. Jeitschko & Leonard J. Mirman, 2003. "Entry Deterrence under Agency Constraints," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 2(3), pages 179-195, December.
- Neelam Jain & Leonard Mirman, 2011. "Lender learning and entry under general demand uncertainty," Review of Economic Design, Springer, vol. 15(2), pages 163-175, June.
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