Bait Contracts

Marie-Louise VierAy

No 273698, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: This paper explores contracting in the presence of ambiguity. It revisits Holmstrom's (1979) suffcient statistic result of when to condition a contract on an outside signal. It is shown that if the signal is ambiguous, in the sense that its probability distribution is unknown, then Holmstrom's result can be overturned. Specically, uninformative ambiguous signals can be valuable.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 24
Date: 2009-08
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:273698

DOI: 10.22004/ag.econ.273698

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