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Strategic information gathering before a contract is offered

  • Cremer, J.
  • Khalil, F.
  • Rochet, J.-C.

In a Baron-Myerson setup, we study a situation where an agent is initially uninformed, but can, at a cost, acquire information about the state of nature before the principal offers him a contract. For intermediate values of the cost of acquiring information, the agent's equilibrium strategy will be a mixed strategy: he will acquire information with a probability strictly between 0 and 2. we identify the contract that the principal will offer to such a "maybe informed" agent.

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Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 9708.

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Date of creation: 01 Jan 1997
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Handle: RePEc:stn:sotoec:9708
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  1. David P. Baron & Roger B. Myerson, 1979. "Regulating a Monopolist with Unknown Costs," Discussion Papers 412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Cremer, Jacques & Khalil, Fahad, 1992. "Gathering Information before Signing a Contract," American Economic Review, American Economic Association, vol. 82(3), pages 566-78, June.
  3. Khalil, F & Rochet, J-C, 1997. "Contracts and Productive Information Gathering," Working Papers 97-16, University of Washington, Department of Economics.
  4. Lewis, Tracy R & Sappington, David E M, 1997. "Information Management in Incentive Problems," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 796-821, August.
  5. Khalil Fahad & Lawarree Jacques, 1995. "Input versus Output Monitoring: Who Is the Residual Claimant?," Journal of Economic Theory, Elsevier, vol. 66(1), pages 139-157, June.
  6. Lewis, Tracy R & Sappington David E M, 1993. "Choosing Workers' Qualifications: No Experience Necessary?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 479-502, August.
  7. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  8. 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.
  9. Craswell, Richard, 1988. "Precontractual Investigation as an Optimal Precaution Problem," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 401-36, June.
  10. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
  11. Lewis Tracy R. & Sappington David E. M., 1993. "Ignorance in Agency Problems," Journal of Economic Theory, Elsevier, vol. 61(1), pages 169-183, October.
  12. Shavell, Steven, 1992. "Liability and the Incentive to Obtain Information about Risk," The Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 259-70, June.
  13. Lewis, Tracy R. & Sappington, David E. M., 1991. "All-or-nothing information control," Economics Letters, Elsevier, vol. 37(2), pages 111-113, October.
  14. Cremer, Jacques & Khalil, Fahad, 1994. "Gathering information before the contract is offered: The case with two states of nature," European Economic Review, Elsevier, vol. 38(3-4), pages 675-682, April.
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