We study how optimal contracts are modified when the agent has the possibility to acquire information before the contract is offered to him. We consider a situation in which this information is always available to the agent just before producing. Therefore, prior information acquisition is socially wasteful, and conducted only for the purpose of rent seeking. In this context, we show that the typical outcome is one in which the agent randomizes between acquiring information or not. Therefore, the principal cannot perfectly anticipate whether the agent is informed or not, and has to offer two different contracts. One is designed for uninformed agents, the other is designed for informed agents.
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Paper provided by Toulouse - GREMAQ in its series Papers with number
976.425.
Find related papers by JEL classification: L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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