In this paper we analyze an adverse selection model with one principal and one agent, who are both risk neutral and have private information. We assume that the private information of the principal is correlated with that of the agent. The main result of the paper is that the principal can...

We study a model of informed principal with private values where the principal is risk neutral and the agent is risk averse. We show that the principal, regardless of her type, gains by not revealing her type to the agent through the contract offer. The equilibrium allocation transfers some...

Consider the following contractual hierarchy: a principal who contracts with a contractor below her who then contracts with a subcontractor. The principal requires goods made from both firms in equal proportions. The question we study is whether, at zero cost, the principal would wish to monitor...