Risky allocations from a risk-neutral informed principal
We study a model of informed principal with private values where the principal is risk neutral and the agent is risk averse. We show that the principal, regardless of her type, gains by not revealing her type to the agent through the contract offer. The equilibrium allocation transfers some ex-ante risk from one type of agent to the other. Despite the increase in the principal's surplus, allocative efficiency does not necessarily improve. Copyright Springer-Verlag Berlin/Heidelberg 2005
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Volume (Year): 9 (2005)
Issue (Month): 3 (08)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
- Cella, Michela, 2008.
"Informed principal with correlation,"
Games and Economic Behavior,
Elsevier, vol. 64(2), pages 433-456, November.
- Michela CELLA, 2007. "Informed principal with correlation," Departmental Working Papers 2007-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Michela Cella, 2006. "Informed Principal with Correlation," Economics Series Working Papers 261, University of Oxford, Department of Economics.
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