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...

We analyze how voluntary disclosure of information by bidders affects the outcome of optimally designed auctions. In a single-object auction environment, we assume that before the revenue-maximizing auctioneer designs the auction, bidders noncooperatively choose signal structures that disclose...