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
Volume (Year): 9 (2005)
Issue (Month): 3 (08)
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- Cella, Michela, 2008.
"Informed principal with correlation,"
Games and Economic Behavior,
Elsevier, vol. 64(2), pages 433-456, November.
- Michela Cella, 2006. "Informed Principal with Correlation," Economics Series Working Papers 261, University of Oxford, Department of Economics.
- 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.
- 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. Full references (including those not matched with items on IDEAS)
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