The Economics of Clear Advice and Extreme Options
Dezsoe Szalay ()
Review of Economic Studies, 2005, vol. 72, issue 4, 1173-1198
I study a principal-agent model in which the agent collects information and then chooses a verifiable action. I show that the principal can find it desirable to constrain the agent's action set even though there is no disagreement about the ranking of actions ex post. The elimination or penalization of "intermediate" actions, which are optimal when information is poor, improves incentives for information collection. I characterize optimal action sets when the agent is infinitely risk averse with respect to income shocks and optimal incentive schemes when the agent is risk neutral. Copyright 2005, Wiley-Blackwell.
References: Add references at CitEc
Citations: View citations in EconPapers (42) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: The Economics of Clear Advice and Extreme Options (2004)
Working Paper: The Economics of Clear Advice and Extreme Options (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:72:y:2005:i:4:p:1173-1198
Access Statistics for this article
Review of Economic Studies is currently edited by Andrea Prat, Bruno Biais, Kjetil Storesletten and Enrique Sentana
More articles in Review of Economic Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ( this e-mail address is bad, please contact ) and Christopher F. Baum ().