The Value of Information in an Agency Model with Moral Hazard
In a principal-agent environment with moral hazard and symmetric information, having or acquiring a more informative technology lowers the cost to implement a given action. Contracting may occur after or before the principal learns her technology. We show that when the principal has or will acquire private information about her technology, (i) with ex post contracting, the value of information for the principal may be negative; and (ii) although the agent prefers that the principal has private information with ex post contracting, ex ante contracting is superior to ex post contracting by the Potential Pareto Criterion.
|Date of creation:||16 Nov 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 61 3 9244 3815
Web page: http://www.deakin.edu.au/buslaw/aef/index.php
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.:
- Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
- Hector Chade & Randolph Silvers, .
"Informed Principal, Moral Hazard, and the Value of a More Informative Technology,"
2133302, Department of Economics, W. P. Carey School of Business, Arizona State University.
- Chade, Hector & Silvers, Randy, 2002. "Informed principal, moral hazard, and the value of a more informative technology," Economics Letters, Elsevier, vol. 74(3), pages 291-300, February.
- Kim, Son Ku, 1995. "Efficiency of an Information System in an Agency Model," Econometrica, Econometric Society, vol. 63(1), pages 89-102, January.
- 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.
- Inderst, Roman, 2001.
"Incentive schemes as a signaling device,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 44(4), pages 455-465, April.
- Shannon, Chris, 1995. "Weak and Strong Monotone Comparative Statics," Economic Theory, Springer, vol. 5(2), pages 209-27, March.
- Roger B. Myerson, 1981.
"Mechanism Design by an Informed Principal,"
481, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- 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.
When requesting a correction, please mention this item's handle: RePEc:dkn:econwp:eco_2006_22. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr Xueli Tang)
If references are entirely missing, you can add them using this form.