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Strategic information gathering before a contract is offered

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  • Cremer, J.
  • Khalil, F.
  • Rochet, J.-C.

Abstract

In a Baron-Myerson setup, we study a situation where an agent is initially uninformed, but can, at a cost, acquire information about the state of nature before the principal offers him a contract. For intermediate values of the cost of acquiring information, the agent's equilibrium strategy will be a mixed strategy: he will acquire information with a probability strictly between 0 and 2. we identify the contract that the principal will offer to such a "maybe informed" agent.

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Bibliographic Info

Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 9708.

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Date of creation: 01 Jan 1997
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Handle: RePEc:stn:sotoec:9708

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References

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  1. Khalil, F & Rochet, J-C, 1997. "Contracts and Productive Information Gathering," Working Papers, University of Washington, Department of Economics 97-16, University of Washington, Department of Economics.
  2. Khalil Fahad & Lawarree Jacques, 1995. "Input versus Output Monitoring: Who Is the Residual Claimant?," Journal of Economic Theory, Elsevier, Elsevier, vol. 66(1), pages 139-157, June.
  3. David P. Baron & Roger B. Myerson, 1979. "Regulating a Monopolist with Unknown Costs," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Cremer, Jacques & Khalil, Fahad, 1994. "Gathering information before the contract is offered: The case with two states of nature," European Economic Review, Elsevier, Elsevier, vol. 38(3-4), pages 675-682, April.
  5. Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
  6. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, American Economic Association, vol. 61(4), pages 561-74, September.
  7. Sobel, Joel, 1993. "Information Control in the Principal-Agent Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 259-69, May.
  8. Lewis Tracy R. & Sappington David E. M., 1993. "Ignorance in Agency Problems," Journal of Economic Theory, Elsevier, Elsevier, vol. 61(1), pages 169-183, October.
  9. Crémer, Jacques & Khalil, Fahad, 1991. "Gathering Information before Signing a Contract," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 5, Institut d'Économie Industrielle (IDEI), Toulouse.
  10. Shavell, Steven, 1992. "Liability and the Incentive to Obtain Information about Risk," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 21(2), pages 259-70, June.
  11. Craswell, Richard, 1988. "Precontractual Investigation as an Optimal Precaution Problem," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 17(2), pages 401-36, June.
  12. Lewis, Tracy R & Sappington David E M, 1993. "Choosing Workers' Qualifications: No Experience Necessary?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 479-502, August.
  13. Lewis, Tracy R & Sappington, David E M, 1997. "Information Management in Incentive Problems," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(4), pages 796-821, August.
  14. Lewis, Tracy R. & Sappington, David E. M., 1991. "All-or-nothing information control," Economics Letters, Elsevier, Elsevier, vol. 37(2), pages 111-113, October.
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