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Contracts with Endogenous Information

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  • Szalay, Dezso

Abstract

I study covert information acquisition and reporting in a principal agent problem allowing for general technologies of information acquisition. When posteriors satisfy local versions of the standard First Order Stochastic Dominance and Concavity/Convexity of the Distribution Function conditions, a Örst-order approach is justiÖed. Under the same conditions, informativeness and riskiness of reports are equivalent. High powered contracts, that make the agentís informational rents more risky, are used to increase incentives for information acquisition, insensitive contracts are used to reduce incentives for information gathering. The value of information to the agent is always positive. The value of information to the principal is ambiguous.

Suggested Citation

  • Szalay, Dezso, 2006. "Contracts with Endogenous Information," Economic Research Papers 269750, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269750
    DOI: 10.22004/ag.econ.269750
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    More about this item

    Keywords

    Research Methods/ Statistical Methods; Teaching/Communication/Extension/Profession;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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