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Contracting for information under imperfect commitment

Vijay Krishna and John Morgan

RAND Journal of Economics, 2008, vol. 39, issue 4, 905-925

Abstract: We study optimal contracting under imperfect commitment in a model with an uninformed principal and an informed agent. The principal can commit to pay the agent for his advice but retains decision‐making authority. Under an optimal contract, the principal should (i) never induce the agent to fully reveal what he knows—even though this is feasible—and (ii) never pay the agent for imprecise information. We compare optimal contracts under imperfect commitment to those under full commitment as well as to delegation schemes. We find that gains from contracting are greatest when the divergence in the preferences of the principal and the agent is moderate.

Date: 2008
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Working Paper: Contracting for Information under Imperfect Commitment (2005) Downloads
Working Paper: Contracting for Information under Imperfect Commitment (2004) Downloads
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