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The strategically ignorant principal

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  • Bedard, Nicholas C.

Abstract

The value of the principal's information is studied in a common value principal–agent model. We prove in a general environment that there is a nontrivial set of parameters for which the principal strictly prefers not to be fully informed, regardless of the equilibrium played. Importantly, we do not restrict the principal's offer-space, thereby allowing her to make full strategic use of any information she has. We also show that, among partitional information structures and given certain priors, the principal's optimal information structure groups together states in which her marginal payoffs are similar and separates states in which they diverge.

Suggested Citation

  • Bedard, Nicholas C., 2017. "The strategically ignorant principal," Games and Economic Behavior, Elsevier, vol. 102(C), pages 548-561.
    • Handle: RePEc:eee:gamebe:v:102:y:2017:i:c:p:548-561
    DOI: 10.1016/j.geb.2017.02.010
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    References listed on IDEAS

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    3. Xin Zhao, 2023. "Auction design by an informed seller: A foundation of reserve price signalling," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(3), pages 1161-1190, August.

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    More about this item

    Keywords

    Value of information; Informed principal problem; Mechanism design;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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