Investment and Screening under Asymmetric Endogenous Information
AbstractThis paper provides an analysis of screening contracts in a complete but imperfect information environment as opposed to the usual incomplete information (Bayesian) environment. An agent faces a hold-up situation while making a cost-reducing specific investment that is not observed by the principal. To prevent the hold-up, the agent randomizes his investment strategy and the principal offers a screening contract. The informational rents provided by the equilibrium contract finance the investment. Because uncertainty is endogenous, the equilibrium contract depends only on tastes, technology and on the strategic opportunities of both players.
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Bibliographic InfoPaper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number 0204.
Date of creation: 2002
Date of revision:
Investment; Hold-up; Asymmetric information;
Other versions of this item:
- Patrick Gonz�lez, 2004. "Investment and Screening Under Asymmetric Endogenous Information," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 502-519, Autumn.
- Gonzalez, Patrick, 2002. "Investment and Screening under Asymmetric Endogenous Information," Cahiers de recherche 0201, GREEN.
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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