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Contracts and Productive Information Gathering

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

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

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 25 (1998)
Issue (Month): 2 (November)
Pages: 174-193

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Handle: RePEc:eee:gamebe:v:25:y:1998:i:2:p:174-193
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Khalil, F & Rochet, J-C, 1997. "Strategic Information Gathering Before a Contract is Offered," Working Papers 97-15, University of Washington, Department of Economics.
  2. David P. Baron & Roger B. Myerson, 1979. "Regulating a Monopolist with Unknown Costs," Discussion Papers 412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-71, September.
  4. Christopher D. Carroll & Miles S. Kimball, 1995. "On the Concavity of the Consumption Function," Macroeconomics 9503003, EconWPA.
  5. Cremer, Jacques & Khalil, Fahad, 1992. "Gathering Information before Signing a Contract," American Economic Review, American Economic Association, vol. 82(3), pages 566-78, June.
  6. Miles, David, 1997. "A Household Level Study of the Determinants of Incomes and Consumption," Economic Journal, Royal Economic Society, vol. 107(440), pages 1-25, January.
  7. Binder, M. & Pesaran, M. H. & Samiei, S. H., 1998. "Analytical and Numerical Solution of Finite-horizon Nonlinear Rational Expectations Models," Cambridge Working Papers in Economics 9808, Faculty of Economics, University of Cambridge.
  8. Carroll Christopher Dixon, 2001. "Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-38, April.
  9. 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.
  10. Neave, Edwin H., 1971. "Multiperiod consumption-investment decisions and risk preference," Journal of Economic Theory, Elsevier, vol. 3(1), pages 40-53, March.
  11. Siegel, Jeremy J., 1992. "The real rate of interest from 1800-1990 : A study of the U.S. and the U.K," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 227-252, April.
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  13. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
  14. 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 259-69, May.
  15. 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.
  16. Lewis Tracy R. & Sappington David E. M., 1993. "Ignorance in Agency Problems," Journal of Economic Theory, Elsevier, vol. 61(1), pages 169-183, October.
  17. van der Ploeg, Frederick, 1993. "A Closed-Form Solution for a Model of Precautionary Saving," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 385-95, April.
  18. Weil, Philippe, 1993. "Precautionary Savings and the Permanent Income Hypothesis," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 367-83, April.
  19. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April.
  20. Zeldes, Stephen P, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 275-98, May.
  21. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  22. Gabriel Talmain, 1994. "Exact and Approximate Solutions to the Problem of Precautionary Savings," Discussion Papers 94-04, University at Albany, SUNY, Department of Economics.
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