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Ex Post Private Information and Monopolistic Screening

Author

Listed:
  • Krahmer Daniel

    () (Free University Berlin)

  • Strausz Roland

    () (Humboldt University of Berlin)

Abstract

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.

Suggested Citation

  • Krahmer Daniel & Strausz Roland, 2008. "Ex Post Private Information and Monopolistic Screening," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-27, October.
  • Handle: RePEc:bpj:bejtec:v:8:y:2008:i:1:n:25
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    References listed on IDEAS

    as
    1. Cremer, Jacques & Khalil, Fahad & Rochet, Jean-Charles, 1998. "Strategic Information Gathering before a Contract Is Offered," Journal of Economic Theory, Elsevier, vol. 81(1), pages 163-200, July.
    2. Cremer, Jacques & Khalil, Fahad, 1992. "Gathering Information before Signing a Contract," American Economic Review, American Economic Association, vol. 82(3), pages 566-578, June.
    3. 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.
    4. Chifeng Dai & Tracy R. Lewis & Giuseppe Lopomo, 2006. "Delegating management to experts," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 503-520, September.
    5. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
    6. Anke Kessler, 1998. "The Value of Ignorance," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 339-354, Summer.
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    Citations

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    Cited by:

    1. Krähmer, Daniel & Strausz, Roland, 2011. "The Benefits of Sequential Screening," CEPR Discussion Papers 8629, C.E.P.R. Discussion Papers.
    2. Litterscheid, Sina & Szalay, Dezsö, 2014. "Sequential, multidimensional screening," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100621, Verein für Socialpolitik / German Economic Association.
    3. Bose, Subir, 2014. "Monopolistic screening and uninformed buyers," Economic Modelling, Elsevier, vol. 36(C), pages 348-353.
    4. Krähmer, Daniel & Kováč, Eugen, 2016. "Optimal sequential delegation," Journal of Economic Theory, Elsevier, vol. 163(C), pages 849-888.
    5. Krähmer, Daniel & Strausz, Roland, 2010. "Optimal Procurement Contracts with Pre–Project Planning," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 303, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Daniel Danau & Annalisa Vinella, 2016. "Sequential screening and the relationship between principal's preferences and agent's incentives," SERIES 01-2016, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2016.
    7. Daniel Danau & Annalisa Vinella, 2015. "Sequential screening with privately known characteristics of cost distribution," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201502, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

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