We model risky lending with costly state verification but without commitment to an audit strategy. The borrower under-reports with a positive probability in the successful state, and the lender audits with a positive probability after a report of failure.

We modify a standard Baron-Myerson model by assuming that, instead of knowing the cost of nature, the agent has to incur a cost "c" to learn it. Under these conditions, the principal will offer contracts that, dependind on the value of "c", try to induce the agent to gather or not information....

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.

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.

We modify a standard Baron-Myerson model by assuming that, instead of knowing the cost of nature, the agent has to incur a cost "c" to learn it. Under these conditions, the principal will offer contracts that, dependind on the value of "c", try to induce the agent to gather or not information....

We model risky lending with costly state verification but without commitment to an audit strategy. The borrower under-reports with a positive probability in the successful state, and the lender audits with a positive probability after a report of failure.