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Information and delay in an agency model

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  • Mikhail Drugov

Abstract

This article studies how delay in contracting depends on an exogenous signal. The agent whose cost is his private information may produce in the first period or be delayed until the second period. A signal about the cost of the agent is available between the two periods. The quality of the good can vary; in the benchmark case of no signal, the principal offers the standard Baron-Myerson contract and there is no delay. Delay is determined by the considerations at the margin and may increase or decrease with a better signal. The value of information can be negative, as a better signal may aggravate the principal's commitment problem. A better signal may also increase the agent's rent and decrease social welfare. Copyright (c) 2010, RAND.

Suggested Citation

  • Mikhail Drugov, 2010. "Information and delay in an agency model," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 598-615.
  • Handle: RePEc:bla:randje:v:41:y:2010:i:3:p:598-615
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    Cited by:

    1. Dongsoo Shin & Roland Strausz, 2014. "Delegation and dynamic incentives," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 495-520, September.
    2. Raffaele Fiocco & Roland Strausz, 2015. "Consumer Standards as a Strategic Device to Mitigate Ratchet Effects in Dynamic Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 550-569, September.
    3. Mikhail Drugov, 2010. "Information and delay in an agency model," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 598-615.
    4. Drugov, Mikhail, 2014. "Bargaining with Informational Externalities in a Market Equilibrium," CEPR Discussion Papers 10021, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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