Contracting for information under imperfect commitment

We study optimal contracting under imperfect commitment in a model with an uninformed principal and an informed agent. The principal can commit to pay the agent for his advice but retains decision-making authority. Under an optimal contract, the principal should (i) never induce the agent to fully reveal what he knows—even though this is feasible and (ii) never pay the agent for imprecise information. We compare optimal contracts under imperfect commitment to those under full commitment as well as to delegation schemes. We find that gains from contracting are greatest when the divergence in the preferences of the principal and the agent is moderate.

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Work Title Contracting for information under imperfect commitment
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Open Access
Creators
  1. Vijay Krishna
  2. John Morgan
License CC BY-NC 4.0 (Attribution-NonCommercial)
Work Type Article
Publisher
  1. The RAND Journal of Economics
Publication Date December 5, 2008
Publisher Identifier (DOI)
  1. https://doi.org/10.1111/j.1756-2171.2008.00043.x
Deposited March 02, 2022

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Version 1
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  • Created
  • Added Creator Vijay Krishna
  • Added Creator John Morgan
  • Added Krishna and Morgan RAND (2008).pdf
  • Updated Description, License Show Changes
    Description
    • We study optimal contracting under imperfect commitment in a model with an uninformed principal and an informed agent. The principal can commit to pay the agent for his advice but retains decision-making authority. Under an optimal contract, the principal should (i) never induce the agent to fully reveal what he knows—even though this is feasible and (ii) never pay the agent for imprecise information. We compare optimal contracts under imperfect commitment to those under full commitment as well as to delegation schemes. We find that gains from contracting are greatest when the divergence in the preferences of the principal and the agent is moderate.
    License
    • https://www.gnu.org/licenses/gpl.html
  • Published
  • Updated
  • Updated

Version 2
published

  • Created
  • Updated Publisher Show Changes
    Publisher
    • RAND Journal of Economics
  • Updated License Show Changes
    License
    • https://www.gnu.org/licenses/gpl.html
    • https://creativecommons.org/licenses/by-nc/4.0/
  • Published
  • Updated Work Title, Publisher, Publisher Identifier (DOI), and 1 more Show Changes
    Work Title
    • Contracting for Information under Imperfect Commitment
    • Contracting for information under imperfect commitment
    Publisher
    • RAND Journal of Economics
    • The RAND Journal of Economics
    Publisher Identifier (DOI)
    • https://doi.org/10.1111/j.1756-2171.2008.00043.x
    Publication Date
    • 2008
    • 2008-12-05
  • Updated