Screening Ethics when Honest Agents Keep their Word

Ingela Alger and Régis Renault

No 562, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We study the implications of honesty when it requires pre-commitment. Within a two-period hidden information problem, an agent learns his match with the assigned task in period 2 and, if honest, reveals it to the principal if he has committed to it. The principal may offer a menu of contracts to screen ethics. Both honest and dishonest agents are willing to misrepresent their ethics. The principal and dishonest agents benefit from an increased likelihood of honesty as long as honesty is likely enough. Honest agents always profit from ethics uncertainty if a good match is likely. This is also true if dishonesty is likely enough, in which case an honest receives the same surplus as a dishonest.

Keywords: ethics; honesty; loyalty; adverse selection; screening (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2003-06-15, Revised 2004-11-09
New Economics Papers: this item is included in nep-cbe
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Citations: View citations in EconPapers (5)

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Journal Article: Screening Ethics when Honest Agents Keep their Word (2007)
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