Precontractual Investigation and Sequential Screening

Should contract design induce an agent to conduct a precontractual investigation even though, in any case, the agent will become fully informed after the signing of the contract? This paper shows that imperfect investigations might be encouraged. The result stands in contrast to previous studies, which focus on perfect investigations. The contrast exists because if precontractual investigation is perfect, the benefits of sequential screening vanish.

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Year of publication:	2013-10-22
Authors:	Terstiege, Stefan
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Principal agent \| information acquisition \| sequential screening

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Extent:	application/pdf
Series:	Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems.
Type of publication:	Book / Working Paper
Classification:	D82 - Asymmetric and Private Information ; D83 - Search, Learning, Information and Knowledge ; D86 - Economics of Contract: Theory
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010700800