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Sequential Communication in Agencies

Author

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  • Peter Ove Christensen

    (Odense University)

  • Gerald A. Feltham

    (Odense University)

Abstract

This paper examines a principal-agent model in which the agent receives a sequence of two signals about the future outcome from his actions. Conditions are identified under which sequential communication (signals reported when received) is strictly preferred to simultaneous communication (signals only reported after all are received). If the second signal does not provide additional information about the outcome, then it can only be valuable if its report is verified. If the first signal is informative about the second and the second provides additional information about the outcome, then there exist settings in which sequential unverified reporting is strictly valuable.

Suggested Citation

  • Peter Ove Christensen & Gerald A. Feltham, 1997. "Sequential Communication in Agencies," Review of Accounting Studies, Springer, vol. 2(2), pages 123-155, June.
    • Handle: RePEc:spr:reaccs:v:2:y:1997:i:2:d:10.1023_a:1023684603889
    DOI: 10.1023/A:1023684603889
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    References listed on IDEAS

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    1. Arya, Anil & Young, Richard A. & Fellingham, John C., 1993. "Preference representation and randomization in principal-agent contracts," Economics Letters, Elsevier, vol. 42(1), pages 25-30.
    2. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    3. Dye, Ra, 1983. "Communication And Post-Decision Information," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 21(2), pages 514-533.
    4. John Christensen, 1981. "Communication in Agencies," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 661-674, Autumn.
    Full references (including those not matched with items on IDEAS)

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