Pessimistic information gathering

Journal article: An agent gathers information on productivity shocks and accordingly produces on behalf of a principal. Information gathering is imperfect and whether it succeeds or not depends on the agent's effort. Contracting frictions come from the fact that the agent is pessimistic on the issue of information gathering, and there are both moral hazard in information gathering, private information on productivity shocks and moral hazard on operating effort. An optimal menu of linear contracts mixes high-powered, productivity-dependent screening options following “good news” with a fixed low-powered option otherwise.

Author(s)

Elisabetta Iossa, David Martimort

Journal
  • Games and Economic Behavior
Date of publication
  • 2015
Keywords JEL
D82 H41
Keywords
  • Information gathering
  • Moral hazard
  • Asymmetric information
  • Pessimism
Pages
  • 75-96
Version
  • 1
Volume
  • 91