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Gathering Information before signing a contract: A screening perspective

Olivier Compte and Philippe Jehiel ()
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Olivier Compte: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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Abstract: A principal has to choose among several agents to fulfill a task and then provide the right incentives to perform it. Agents do not a priori know how competent they are for the task. It is shown that the principal should propose a contract that leads the agents to gather information about their competence prior to signing the contract. This insight is in sharp contrast with Crémer and Khalil [J. Crémer, F. Khalil: "Gathering information before signing a contract", American Economic Review, 82, 1992, 566-578] who consider a setup with one agent (or alternatively a setup with several agents in which the private information commonly applies to all agents). It emerges because, in our private value setup, information acquisition accompanied by a proper screening device increases the chance that the principal will pick a competent agent.

Keywords: Information acquisition; Screening; Principal-agent (search for similar items in EconPapers)
Date: 2008-01
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Citations: View citations in EconPapers (8)

Published in International Journal of Industrial Organization, 2008, 26 (1), pp.206-212. ⟨10.1016/j.ijindorg.2006.11.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754311

DOI: 10.1016/j.ijindorg.2006.11.002

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