This paper studies a monopoly firm with the ability to conduct costly premarket testing of its product in order to predict how safe this product is to consume. While there are private incentives to test, the amount of testing effort supplied by a monopolist need not be optimal. In a model which...

In this paper, the authors examine the problem of inducing a manager to acquire information that is useful in determining his optimal job assignment but which might also adversel y affect his market value. The authors show that spot contracts are optimal and generate the first-best effort level...