Endogenous information and stochastic contracts

Stefan Terstiege

Games and Economic Behavior, 2012, vol. 76, issue 2, 535-547

Abstract: A growing literature analyzes revenue-maximizing contracts for situations in which agents can acquire private information before they decide whether to join the contract. It is conjectured that the results also apply to the more natural scenario where information can be acquired either before or after signing. This paper shows that, in fact, the latter scenario is more favorable for the principal. Using stochastic contracts, she can induce information acquisition with some probability and yet appropriate the generated surplus.

Keywords: Principal agent; Information acquisition; Stochastic contracts (search for similar items in EconPapers)
JEL-codes: D82 D83 D86 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:76:y:2012:i:2:p:535-547

DOI: 10.1016/j.geb.2012.08.001

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