Gathering Information before signing a contract: A screening perspective
Journal article: 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.
Author(s)
Olivier Compte, Philippe Jehiel
Journal
- International Journal of Industrial Organization
Date of publication
- 2008
Keywords JEL
Keywords
- Information acquisition
- Screening
- Principal-agent
Pages
- 206-212
URL of the HAL notice
Version
- 1
Volume
- 26