Precontractual Investigation and Sequential Screening

Stefan Terstiege

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: Should contract design induce an agent to conduct a precontractual investigation even though, in any case, the agent will become fully informed after the signing of the contract? This paper shows that imperfect investigations might be encouraged. The result stands in contrast to previous studies, which focus on perfect investigations. The contrast exists because if precontractual investigation is perfect, the benefits of sequential screening vanish.

Keywords: Principal agent; information acquisition; sequential screening (search for similar items in EconPapers)
JEL-codes: D82 D83 D86 (search for similar items in EconPapers)
Date: 2013-10-22
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:429

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