WHEN DOES IT PAY TO GET INFORMED?

Ayça Kaya

International Economic Review, 2010, vol. 51, issue 2, 533-551

Abstract: A repeated principal-agent problem where both sides start out symmetrically uninformed about a productivity-related parameter and where the principal has the option to costlessly learn this parameter is analyzed. Typically, the principal delays the acquisition of information to avoid costly signaling. If the learning decision of the principal is observable by the agent, the expected delay is longer than if it is unobservable. The discrepancy is due to the ability of the principal to avoid costly signaling when he is known to be uninformed. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 2010
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Working Paper: When does it pay to get informed? (2007)
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