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Contracts and Productive Information Gathering

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  • Cremer, Jacques
  • Khalil, Fahad
  • Rochet, Jean-Charles

Abstract

We modify a standard Baron-Myerson model by assuming that, instead of knowing the cost of nature, the agent has to incur a cost 'g' to learn it.Under these conditions, the principal will offer contracts that, dependingon the value of 'g', try to induce the agent to gather or not to gather information. We study the tradeoffs that are involved.
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Suggested Citation

  • Cremer, Jacques & Khalil, Fahad & Rochet, Jean-Charles, 1998. "Contracts and Productive Information Gathering," Games and Economic Behavior, Elsevier, vol. 25(2), pages 174-193, November.
    • Handle: RePEc:eee:gamebe:v:25:y:1998:i:2:p:174-193
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    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. Lewis, Tracy R. & Sappington, David E. M., 1991. "All-or-nothing information control," Economics Letters, Elsevier, vol. 37(2), pages 111-113, October.
    4. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
    5. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-930, July.
    6. Lewis Tracy R. & Sappington David E. M., 1993. "Ignorance in Agency Problems," Journal of Economic Theory, Elsevier, vol. 61(1), pages 169-183, October.
    7. Khalil Fahad & Lawarree Jacques, 1995. "Input versus Output Monitoring: Who Is the Residual Claimant?," Journal of Economic Theory, Elsevier, vol. 66(1), pages 139-157, June.
    8. Barzel, Yoram, 1977. "Some Fallacies in the Interpretation of Information Costs," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 291-307, October.
    9. 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, vol. 34(2), pages 259-269, May.
    10. Lewis, Tracy R & Sappington, David E M, 1997. "Information Management in Incentive Problems," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 796-821, August.
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    More about this item

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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