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Ex Post Private Information and Monopolistic Screening

Listed author(s):
  • Krahmer Daniel

    ()

    (Free University Berlin)

  • Strausz Roland

    ()

    (Humboldt University of Berlin)

This paper investigates how additional ex post private information by the agent affects the equilibrium outcome of the monopolistic screening model. In general, the principal always weakly benefits when the agent receives additional private information after the contracting stage. Instead, both the agent's equilibrium payoffs and allocative efficiency may, due to the principal's concerns about information rents, increase or decrease. Moreover, we obtain the result that optimal contracts may involve lying offtheequilibrium path and show that this exacerbates bunching in the monopolistic screening problem.

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Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 8 (2008)
Issue (Month): 1 (October)
Pages: 1-27

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Handle: RePEc:bpj:bejtec:v:8:y:2008:i:1:n:25
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References listed on IDEAS
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  1. Cremer, J. & Khalil, F., 1991. "Gathering Information Before Signing a Contract," Discussion Papers in Economics at the University of Washington 91-16, Department of Economics at the University of Washington.
  2. Marco Battaglini, 2003. "Long-Term Contracting with Markovian Consumers," Theory workshop papers 505798000000000048, UCLA Department of Economics.
  3. Cremer, J. & Khalil, F. & Rochet, J.-C., 1997. "Strategic information gathering before a contract is offered," Discussion Paper Series In Economics And Econometrics 9708, Economics Division, School of Social Sciences, University of Southampton.
  4. Péter Eső & Balázs Szentes, 2007. "Optimal Information Disclosure in Auctions and the Handicap Auction," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 705-731.
  5. Anke Kessler, 1998. "The Value of Ignorance," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 339-354, Summer.
  6. Chifeng Dai & Tracy R. Lewis & Giuseppe Lopomo, 2006. "Delegating management to experts," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 503-520, 09.
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