In a principal-agent environment with moral hazard, when contracting occurs after the principal receives information about her technology, the principal cannot insure against the possibility that the technology is less informative. From an ex ante perspective, we show that: (i) the principal is worse off by acquiring private information if the agent will know that she is informed; (ii) the value of public information is negative if the principal implements the same action profile; and (iii) although the agent prefers that the principal has private information, there exists a transfer and a contract that make both players better off with complete information.
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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_24.
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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