Risky Allocations from a Risk-Neutral Informed Principal
AbstractWe study a model of informed principal with private values where the principal is risk neutral and the agent is risk averse. We show that the principal, regardless of her type, gains by not revealing her type to the agent through the contract offer. The equilibrium allocation transfers some ex-ante risk from one type of agent to the other. Despite the increase in the principal`s surplus, allocative efficiency does not necessarily improve.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 234.
Date of creation: 01 Apr 2005
Date of revision:
Contract; Adverse Selection; Informed Principal; Risk Aversion;
Other versions of this item:
- Michela Cella, 2005. "Risky allocations from a risk-neutral informed principal," Review of Economic Design, Springer, vol. 9(3), pages 191-202, 08.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-18 (All new papers)
- NEP-FMK-2006-03-18 (Financial Markets)
- NEP-UPT-2006-03-18 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
- Michela CELLA, 2007.
"Informed principal with correlation,"
Departmental Working Papers
2007-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
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