Investment and Screening under Asymmetric Endogenous Information

Patrick Gonzalez ()

Cahiers de recherche from Université Laval - Département d'économique

Abstract:

This paper provides an analysis of screening contracts in a complete but imperfect information environment as opposed to the usual incomplete information (Bayesian) environment. An agent faces a hold-up situation while making a cost-reducing specific investment that is not observed by the principal. To prevent the hold-up, the agent randomizes his investment strategy and the principal offers a screening contract. The informational rents provided by the equilibrium contract finance the investment. Because uncertainty is endogenous, the equilibrium contract depends only on tastes, technology and on the strategic opportunities of both players.

Keywords: Investment; Hold-up; Asymmetric information (search for similar items in EconPapers)
JEL-codes: D82 L14 (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-mfd
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Citations: View citations in EconPapers (4)

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http://www.ecn.ulaval.ca/w3/recherche/cahiers/2002/0204.pdf (application/pdf)

Related works:
Journal Article: Investment and Screening Under Asymmetric Endogenous Information (2004)
Working Paper: Investment and Screening under Asymmetric Endogenous Information (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:laeccr:0204

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