Riordan and Sappington (JET, 1988) show that in an agency relationship in which the agent's type is correlated with a public ex post signal, the principal may attain first best (full surplus extraction and efficient output levels) if the agent is faced with a lottery such that each type is...

We study a sequential screening problem in which the information structure is characterized by neither first-order stochastic dominance (FOSD) nor mean-preserving spread (MPS). Specifically, we refer to a procurement contract with privately known mean and spread of cost distribution. The...

Riordan and Sappington (JET, 1988) show that in an agency relationship in which the agent's type is correlated with a public ex post signal, the principal may attain first best (full surplus extraction and efficient output levels) if the agent is faced with a lottery such that each type is...

We model an agency relationship in which the agent's cost is non-monotonic with respect to type and the type is correlated with a public ex-post signal. The principal can use lotteries to exploit the type-signal correlation within the limit of the agent's liability. We establish conditions for...