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Information provision before a contract is offered

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  • Kim, Jaesoo
  • Shin, Dongsoo

Abstract

This paper considers an agency model in which the agent can update the principal’s belief before the contract is offered. We identify that the agent who has a bad potential to perform the task has a small chance to receive information rent, but if he receives it, he receives a large amount. Thus, the agent may choose to provide more information that shifts the principal’s belief to the negative direction if the prior belief is optimistic.

Suggested Citation

  • Kim, Jaesoo & Shin, Dongsoo, 2014. "Information provision before a contract is offered," Economics Letters, Elsevier, vol. 124(3), pages 490-493.
    • Handle: RePEc:eee:ecolet:v:124:y:2014:i:3:p:490-493
    DOI: 10.1016/j.econlet.2014.06.037
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    References listed on IDEAS

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    More about this item

    Keywords

    Agency contracting; Information provision; Information rent;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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