Contracting under Adverse Selection: Certifiable vs. Uncertifiable Information

Patrick Schmitz

No 15514, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The analysis of adverse selection problems in seller-buyer relationships has typically been based on the assumption that private information is uncertifiable, while in practice it may well be certifiable. If a buyer has certifiable private information, he can conceal evidence, but he cannot claim to have information for which he has no evidence, so he has fewer possibilities to misrepresent his information. Nevertheless, we find that the expected total surplus can be strictly smaller in the case of certifiable information than in the case of uncertifiable information. This finding holds when the buyer may have private information with some exogenous probability as well as in the case of opportunistic information gathering, where the buyer can privately decide whether or not to acquire information for strategic reasons.

Keywords: Contracting; Asymmetric information; Adverse selection; Screening; Information gathering (search for similar items in EconPapers)
JEL-codes: C73 D23 D82 D86 L24 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP15514 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Contracting under adverse selection: Certifiable vs. uncertifiable information (2021)
Working Paper: Contracting under Adverse Selection: Certifiable vs. Uncertifiable Information (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:15514

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP15514

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().