We study the effect of additional private information in an agency model with an endogenous information structure. If more private information becomes available to the agent, this may hurt the agent, benefit the principal, and affect the total surplus ambiguously.

We consider an adverse selection model in which the agent can gather private information before the principal offers the contract. In scenario I, information gathering is a hidden action, while in scenario II, it is observable. We study how the two scenarios differ. Specifically, the principal...

Principal-agent models in which the agent has access to private information before a contract is signed are a cornerstone of contract theory. We have conducted an experiment with 720 participants to explore whether the theoretical insights are reflected by the behavior of subjects in the...

Principal-agent models in which the agent has access to private information before a contract is signed are a cornerstone of contract theory. We have conducted an experiment with 720 participants to explore whether the theoretical insights are reflected by the behavior of subjects in the...

A central insight of agency theory is that when a principal offers a contract to a privately informed agent, the principal trades off ex post efficiency in the bad state of nature against a larger profit in the good state of nature. We report about an experiment with 508 participants designed to...

This paper investigates how a buyer and a seller exchanging two goods should write the contract, where the seller makes sequences of unobservable relation-specific investments and the buyer privately learns valuations for goods which are stochastically influenced by the investments and these two...

A risk averse agent gathers information on productivity shocks and produces accordingly on behalf of his principal. Information gathering is imperfect so that the agent has either complete or no knowledge at all of those shocks. The model allows for moral hazard in information gathering, private...

The paper studies a model of delegated search. The distribution of search revenues is unknown to the principal and has to be elicited from the agent in order to design the optimal search policy. At the same time, the search process is unobservable, requiring search to be self-enforcing. The two...

The paper studies a model of delegated search. The distribution of search revenues is unknown to the principal and has to be elicited from the agent in order to design the optimal search policy. At the same time, the search process is unobservable, requiring search to be self-enforcing. The two...

The paper studies a model of delegated search. The distribution of search revenues is unknown to the principal and has to be elicited from the agent in order to design the optimal search policy. At the same time, the search process is unobservable, requiring search to be self-enforcing. The two...