IDEAS home Printed from https://ideas.repec.org/a/ier/iecrev/v46y2005i4p1207-1231.html
   My bibliography  Save this article

Endogenous Punishments In Agency With Verifiable Ex Post Information

Author

Listed:
  • Anke S. Kessler
  • Christoph Lülfesmann
  • Patrick W. Schmitz

Abstract

The article studies an adverse selection model in which a contractible, imperfect signal on the agent's type is revealed ex post. The agent is wealth constrained, which implies that the maximum penalty depends on the contracted transaction (e.g., the volume of trade). First, we show that the qualitative effects of the signal can be unambiguously tied to the nature of the problem (e.g., whether the agent is in a "buyer" or a "seller" position). Second, the distortions caused by informational asymmetries may become more severe although more information is now available. Finally, the signal can actually serve to increase the agent's informational rents. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Anke S. Kessler & Christoph Lülfesmann & Patrick W. Schmitz, 2005. "Endogenous Punishments In Agency With Verifiable Ex Post Information ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1207-1231, November.
    • Handle: RePEc:ier:iecrev:v:46:y:2005:i:4:p:1207-1231
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chillemi, Ottorino & Galavotti, Stefano & Gui, Benedetto, 2020. "Optimal contracts with contingent allocation," Economics Letters, Elsevier, vol. 192(C).
    2. Schmitz, Patrick W., 2007. "Optimal selling strategies when buyers may have hard information," European Economic Review, Elsevier, vol. 51(4), pages 859-870, May.
    3. Goldlücke, Susanne & Schmitz, Patrick W., 2018. "Pollution claim settlements reconsidered: Hidden information and bounded payments," European Economic Review, Elsevier, vol. 110(C), pages 211-222.
    4. Feess Eberhard & Walzl Markus & Schieble Michael, 2011. "Why it Pays to Conceal: On the Optimal Timing of Acquiring Verifiable Information," German Economic Review, De Gruyter, vol. 12(1), pages 100-123, February.
    5. Patrick W. Schmitz, 2006. "Book Review," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(3), pages 535-542, September.
    6. Robert Gary‐Bobo & Yossi Spiegel, 2006. "Optimal state‐contingent regulation under limited liability," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 431-448, June.
    7. Donaldson, Jason Roderick & Piacentino, Giorgia, 2018. "Contracting to compete for flows," Journal of Economic Theory, Elsevier, vol. 173(C), pages 289-319.
    8. Anyangah, Joshua O., 2017. "Creditor rights protection, tort claims and credit," International Review of Law and Economics, Elsevier, vol. 52(C), pages 29-43.
    9. Daniel Danau & Annalisa Vinella, 2017. "Contractual design in agency problems with non-monotonic cost and correlated information," SERIES 02-2017, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2017.
    10. Pereyra, Juan Sebastián & Silva, Francisco, 2023. "Optimal assignment mechanisms with imperfect verification," Theoretical Economics, Econometric Society, vol. 18(2), May.
    11. Marina Halac & Pierre Yared, 2022. "Instrument-Based versus Target-Based Rules [“The Economics of Labor Coercion”]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(1), pages 312-345.
    12. Schmitz, Patrick W., 2006. "Book Review of “Contract Theory” (Bolton and Dewatripont, 2005)," MPRA Paper 6977, University Library of Munich, Germany.
    13. Daniel Danau & Annalisa Vinella, 2020. "A note on optimal contracting with public ex post information under limited liability," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(1), pages 47-74, March.
    14. Mikhail Drugov, 2010. "Information and delay in an agency model," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 598-615, September.
    15. Anke S. Kessler, 2004. "Optimal Auditing in Hierarchical Relationships," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(2), pages 210-231, June.
    16. Silvers, Randy, 2012. "The value of information in a principal–agent model with moral hazard: The ex post contracting case," Games and Economic Behavior, Elsevier, vol. 74(1), pages 352-365.
    17. Roland Strausz, 2006. "Interim Information in Long‐Term Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 1041-1067, December.
    18. Daniel Danau & Analisa Vinella, 2016. "On the optimal use of correlated information in contractual design under limited liability," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2016-05, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:46:y:2005:i:4:p:1207-1231. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.