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When Does It Pay To Get Informed?

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  • Ayça Kaya

Abstract

A repeated principal-agent problem where both sides start out symmetrically uninformed about a productivity-related parameter and where the principal has the option to costlessly learn this parameter is analyzed. Typically, the principal delays the acquisition of information to avoid costly signaling. If the learning decision of the principal is observable by the agent, the expected delay is longer than if it is unobservable. The discrepancy is due to the ability of the principal to avoid costly signaling when he is known to be uninformed. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Ayça Kaya, 2010. "When Does It Pay To Get Informed?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 533-551, May.
    • Handle: RePEc:ier:iecrev:v:51:y:2010:i:2:p:533-551
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    Cited by:

    1. Baake Pio & Harasser Andreas & Heiny Friederike, 2017. "Information Acquisition in Vertical Relations," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-13, February.
    2. Schumacher, Heiner & Thysen, Heidi Christina, 2022. "Equilibrium contracts and boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 17(1), January.
    3. Bin R. Chen & Sanxi Li, 2018. "Prehire Screening and Subjective Performance Evaluations," Management Science, INFORMS, vol. 64(10), pages 4953-4965, October.
    4. Mylovanov, Timofiy & Troger, Thomas E., 2012. "Informed principal problems in generalized private values environments," Theoretical Economics, Econometric Society, vol. 7(3), September.
    5. Nicholas Charles Bedard, 2017. "Contracts in informed-principal problems with moral hazard," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 21-34, April.
    6. Bedard, Nicholas C., 2017. "The strategically ignorant principal," Games and Economic Behavior, Elsevier, vol. 102(C), pages 548-561.
    7. Chen, Bin R., 2015. "Subjective performance feedback, ability attribution, and renegotiation-proof contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 155-174.
    8. Ismail Saglam, 2024. "The Bayesian approach to monopoly regulation after 40 years," Journal of Regulatory Economics, Springer, vol. 65(1), pages 108-136, June.
    9. Wagner, Christoph & Mylovanov, Tymofiy & Tröger, Thomas, 2015. "Informed-principal problem with moral hazard, risk neutrality, and no limited liability," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 280-289.
    10. McLeod, Alex, 2021. "Discovery, disclosure, and confidence," International Review of Law and Economics, Elsevier, vol. 66(C).

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