We examine an agency model with moral hazard in which, after contracting, the principal will receive a signal correlated with her technology. In this ex ante contracting situation, we compare private, secret, and symmetric information. We show that (i) in contrast to ex post contracting, the principal prefers having private information to having null information; (ii) the value to the principal and agency of public information is negative if the principal implements a constant action profile; and (iii) the principal gains from the possibility of having imperfect information if and only if the principal implements a non-constant action profile.
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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number
2006_23.
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
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