Information Gathering, Disclosure and Contracting in Competitive Markets
The paper studies the determinants of information gathering in insurance and credit markets. In our set-up, information may have either operational or strategic value, e.g. it may improve allocative decisions or allow agents to appropriate a larger share of gains from trade at the contracting stage. The timing of information gathering is endogenous and agents can gather information either before or after contracting. Access to precontractual information generates a negative contracting externality, which was first identified in Hirshleifer.s (1971) seminal contribution. In contrast with a well established conventional wisdom and a substantial literature, we prove that, if the operational value of information is positive and not "too small", private returns of information fall short of its social returns, and pre-contractual access to information leads to under-investment . On the contrary, agents over-invest in information gathering activities, when the operational value of the available signals is sufficiently low. Consistently with contractual arrangements observed in the real world, we also show that equilibrium contracts have also a very simple shape when private information can be voluntarily disclosed.
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- Dirk Bergemann & Juuso Valimaki, 2002.
"Information Acquisition and Efficient Mechanism Design,"
Econometric Society, vol. 70(3), pages 1007-1033, May.
- Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation for Research in Economics, Yale University.
- Susan Athey, 2002.
"Monotone Comparative Statics under Uncertainty,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 117(1), pages 187-223.
- Compte, Olivier & Jehiel, Philippe, 2008.
"Gathering information before signing a contract: A screening perspective,"
International Journal of Industrial Organization,
Elsevier, vol. 26(1), pages 206-212, January.
- Olivier Compte & Philippe Jehiel, 2008. "Gathering Information before signing a contract: A screening perspective," Post-Print halshs-00754311, HAL.
- Nicola Persico, 1997.
"Information Acquisition in Auctions,"
UCLA Economics Working Papers
762, UCLA Department of Economics.
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