More than thirty years ago Milton Friedman proposed a 'plucking' model of business fluctuations in which output cannot exceed a ceiling level, but will, from time to time, be plucked downward by recession. The model implied that business fluctuations are asymmetric, that recessions have only a...

In a Baron-Myerson setup, we study a situation where an agent is initially uninformed, but can, at a cost, acquire information about the state of nature before the principal offers him a contract.