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Complete contracts under incomplete information

Curello, Gregorio; Lyu, Qianjun; Zhang, Yimeng - 2024

We study a moral hazard model in which the output is stochastically determined by both the agent's hidden effort and an uncertain state of the world. We investigate how the contractibility of the ex-post realization of the state affects the principal's incentive to provide information. While...

Persistent link: https://www.econbiz.de/10015135462

Learning from failures : optimal contract for experimentation and production

Khalil, Fahad; Lawarrée, Jacques; Rodivilov, Alexander - 2018

Before embarking on a project, a principal must often rely on an agent to learn about its profitability. We model this learning as a two-armed bandit problem and highlight the interaction between learning (experimentation) and production. We derive the optimal contract for both experimentation...

Persistent link: https://www.econbiz.de/10011926023

Random inspections and periodic reviews : optimal dynamic monitoring

Varas, Felipe; Marinovic, Iván; Skrzypacz, Andrzej - 2018

We study the design of monitoring in dynamic settings with moral hazard. An agent (e.g. a firm) benefits from reputation for quality, and a principal (e.g. a regulator) can learn the agent's quality via costly inspections. Monitoring plays two roles: an incentive role, because outcomes of...

Persistent link: https://www.econbiz.de/10011865082

Dynamic contracts when agent's quality is unknown

Prat, Julien; Jovanovic, Boyan - In: Theoretical economics : TE ; an open access journal in … 9 (2014) 3, pp. 865-914

We solve a long-term contracting problem with symmetric uncertainty about the agent's quality, and a hidden action of the agent. As information about quality accumulates, incentives become easier to provide because the agent has less room to manipulate the principal's beliefs. This result is...

Persistent link: https://www.econbiz.de/10011674079

Sequential procurement with contractual and experimental learning

Gur, Yonatan; Macnamara, Gregory; Saban, Daniela - 2019

We study the design of sequential procurement strategies that integrate stochastic and strategic information. We consider a buyer who repeatedly demands a certain good and is unable to commit to long-term contracts. In each time period, the buyer makes a price offer to a seller who has private,...

Persistent link: https://www.econbiz.de/10012065183

Contracts that Reward Innovation : Delegated Experimentation with an Informed Principal

Sun, Yiman - 2018

We examine the nature of contracts that optimally reward innovations in a risky environment, when the innovator is privately informed about the quality of her innovation and must engage an agent to develop it. We model the innovator as a principal who has private but imperfect information about...

Persistent link: https://www.econbiz.de/10012932065

Dynamic contracting : an irrelevance theorem

Eső, Péter; Szentes, Balàzs - In: Theoretical economics : TE ; an open access journal in … 12 (2017) 1, pp. 109-139

This paper generalizes a conceptual insight in dynamic contracting with quasilin- ear payoffs: the principal does not need to pay any information rents for extract- ing the agent’s “new” private information obtained after signing the contract. This is shown in a general model in which the...

Persistent link: https://www.econbiz.de/10011704662

Optimal sequential delegation

Kovác, Eugen; Krähmer, Daniel - 2013

The paper extends the optimal delegation framework pioneered by Holmström (1977, 1984) to a dynamic environment where, at the outset, the agent privately knows his ability to interpret decision relevant private information received later on. We show that any mechanism can be implemented by a...

Persistent link: https://www.econbiz.de/10010198973

Contracting with imperfect commitment and noisy communication

Bester, Helmut; Strausz, Roland - 2004 - Version 1.3, December 2004

commitment. By allowing the principal to use general communication devices we overcome the literature's common, but overly … restrictive focus on one-shot, direct communication. In addition, general communication devices solve two fundamental problems of … the message spaces of the communication device. An example illustrates our arguments and the suboptimality of one …

Persistent link: https://www.econbiz.de/10010361996

Communicating subjective evaluations

Lang, Matthias - 2012 - this version: August 2013

Should principals explain and justify their evaluations? In this paper the principal's evaluation is private information, but she can provide justification by sending a costly cheap-talk message. I show that the principal explains her evaluation to the agent if the evaluation turns out to be...

Persistent link: https://www.econbiz.de/10009569527