IDEAS home Printed from https://ideas.repec.org/a/the/publsh/4465.html
   My bibliography  Save this article

Paying with information

Author

Listed:
  • Kaya, Ayça

    (Department of Economics, University of Miami)

Abstract

The founder of a start-up (principal) who has a project with uncertain returns must retain and incentivize an agent using promise of future payments and information gathering. The agent's effort incrementally advances production and such advance is a prerequisite for gathering new information. The principal decides how much information to gather based on these incremental advancements. The principal faces cash constraints. The agent's outside option is large relative to his effort cost. Equilibrium features one of two outcomes: immediate learning, whereby the agent's compensation is low, learning is immediate and retention is possible only conditional on the project being of high quality; or gradual learning, whereby the agent's compensation is high, learning is gradual, the agent never quits and effort is inefficiently high.

Suggested Citation

  • Kaya, Ayça, 2023. "Paying with information," Theoretical Economics, Econometric Society, vol. 18(2), May.
    • Handle: RePEc:the:publsh:4465
    as

    Download full text from publisher

    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20230669/36531/1096
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jacopo Bizzotto & Jesper Rüdiger & Adrien Vigier, 2021. "Dynamic Persuasion with Outside Information," American Economic Journal: Microeconomics, American Economic Association, vol. 13(1), pages 179-194, February.
    2. Dmitry Orlov & Andrzej Skrzypacz & Pavel Zryumov, 2020. "Persuading the Principal to Wait," Journal of Political Economy, University of Chicago Press, vol. 128(7), pages 2542-2578.
    3. Jeffrey C. Ely & Martin Szydlowski, 2020. "Moving the Goalposts," Journal of Political Economy, University of Chicago Press, vol. 128(2), pages 468-506.
    4. Pak Hung Au, 2015. "Dynamic information disclosure," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 791-823, October.
    5. Li, Cheng, 2017. "A model of Bayesian persuasion with transfers," Economics Letters, Elsevier, vol. 161(C), pages 93-95.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ian Ball, 2023. "Dynamic Information Provision: Rewarding the Past and Guiding the Future," Econometrica, Econometric Society, vol. 91(4), pages 1363-1391, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kolotilin, Anton & Li, Hongyi, 2021. "Relational communication," Theoretical Economics, Econometric Society, vol. 16(4), November.
    2. Parakhonyak, Alexei & Vikander, Nick, 2023. "Information design through scarcity and social learning," Journal of Economic Theory, Elsevier, vol. 207(C).
    3. Jacopo Bizzotto & Adrien Vigier, 2021. "Can a better informed listener be easier to persuade?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 705-721, October.
    4. Zhao, Wei & Mezzetti, Claudio & Renou, Ludovic & Tomala, Tristan, 0. "Contracting over persistent information," Theoretical Economics, Econometric Society.
    5. Shih-Tang Su & Vijay G. Subramanian & Grant Schoenebeck, 2021. "Bayesian Persuasion in Sequential Trials," Papers 2110.09594, arXiv.org, revised Nov 2021.
    6. Maxim Senkov, 2022. "Setting Interim Deadlines to Persuade," Papers 2210.08294, arXiv.org, revised Jan 2023.
    7. Teddy Mekonnen & Zeky Murra-Anton & Bobak Pakzad-Hurson, 2023. "Persuaded Search," Papers 2303.13409, arXiv.org, revised Oct 2023.
    8. Ehud Lehrer & Dimitry Shaiderman, 2022. "Markovian Persuasion with Stochastic Revelations," Papers 2204.08659, arXiv.org, revised May 2022.
    9. Chang Liu, 2021. "Motivating Effort with Information about Future Rewards," Papers 2110.05643, arXiv.org, revised Oct 2023.
    10. Ian Ball, 2023. "Dynamic Information Provision: Rewarding the Past and Guiding the Future," Econometrica, Econometric Society, vol. 91(4), pages 1363-1391, July.
    11. Farzaneh Farhadi & Demosthenis Teneketzis, 2022. "Dynamic Information Design: A Simple Problem on Optimal Sequential Information Disclosure," Dynamic Games and Applications, Springer, vol. 12(2), pages 443-484, June.
    12. Dirk Bergemann & Stephen Morris, 2019. "Information Design: A Unified Perspective," Journal of Economic Literature, American Economic Association, vol. 57(1), pages 44-95, March.
    13. Gleb Romanyuk & Alex Smolin, 2019. "Cream Skimming and Information Design in Matching Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 11(2), pages 250-276, May.
    14. Belay, Dagim G. & Jensen, Jørgen D., 2020. "‘The scarlet letters’: Information disclosure and self-regulation: Evidence from antibiotic use in Denmark," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    15. Orlov, Dmitry, 2022. "Frequent monitoring in dynamic contracts," Journal of Economic Theory, Elsevier, vol. 206(C).
    16. Au, Pak Hung & Kawai, Keiichi, 2020. "Competitive information disclosure by multiple senders," Games and Economic Behavior, Elsevier, vol. 119(C), pages 56-78.
    17. Patrick DeJarnette & David Dillenberger & Daniel Gottlieb & Pietro Ortoleva, 2020. "Time Lotteries and Stochastic Impatience," Econometrica, Econometric Society, vol. 88(2), pages 619-656, March.
    18. Alex Smolin, 2021. "Dynamic Evaluation Design," American Economic Journal: Microeconomics, American Economic Association, vol. 13(4), pages 300-331, November.
    19. Aleksandr Alekseev, 2022. "Give me a challenge or give me a raise," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 170-202, February.
    20. Pietro Ortoleva & Evgenii Safonov & Leeat Yariv, 2021. "Who Cares More? Allocation with Diverse Preference Intensities," Papers 2108.12025, arXiv.org.

    More about this item

    Keywords

    Informational incentives; information control; agency costs;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:the:publsh:4465. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin J. Osborne (email available below). General contact details of provider: http://econtheory.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.