Information provision before a contract is offered

Jaesoo Kim () and Dongsoo Shin ()

Economics Letters, 2014, vol. 124, issue 3, 490-493

Abstract: This paper considers an agency model in which the agent can update the principal’s belief before the contract is offered. We identify that the agent who has a bad potential to perform the task has a small chance to receive information rent, but if he receives it, he receives a large amount. Thus, the agent may choose to provide more information that shifts the principal’s belief to the negative direction if the prior belief is optimistic.

Keywords: Agency contracting; Information provision; Information rent (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:124:y:2014:i:3:p:490-493

DOI: 10.1016/j.econlet.2014.06.037

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