Gathering imperfect information before signing a contract

Stefan Terstiege

Games and Economic Behavior, 2016, vol. 97, issue C, 70-87

Abstract: I study information gathering for rent-seeking purposes in contracting. In my model, an agent learns his payoff type only after accepting a contract, but can at costs acquire imperfect information while deliberating whether to accept. I show that the principal deters the acquisition if and only if the costs are high. The result stands in contrast to a finding by Crémer and Khalil (1992), who demonstrate that the acquisition of perfect information will always be deterred. A key insight is that the case of imperfect information is an instance of a sequential-screening problem.

Keywords: Principal agent; Information acquisition; Rent seeking; Sequential screening (search for similar items in EconPapers)
JEL-codes: D82 D83 D86 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:97:y:2016:i:c:p:70-87

DOI: 10.1016/j.geb.2016.03.009

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