Randomization in contracts with endogenous information
AbstractI consider a situation, where the agent can acquire payoff-relevant information either before or after the contract is signed. To raise efficiency, the principal might solicit information; to retain all surplus, however, she must prevent precontractual information gathering. The following class of stochastic contracts may solve this trade-off optimally: before signing, information acquisition is not solicited, and afterwards randomly. The key insight is that randomization makes precontractual information costlier for the agent.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse07_2011.
Date of creation: Jun 2011
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Information acquisition; Principal-agent; Mechanism design; Randomization;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-14 (All new papers)
- NEP-CTA-2012-03-14 (Contract Theory & Applications)
- NEP-MIC-2012-03-14 (Microeconomics)
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