An agent may manipulate information when transmitting it to the principal. A direct response to this problem is to verify the information. The paper explores a situation where the principal engages in information verification herself or alternatively delegates it to the agent. The paper finds...

We develop a dynamic principal-agent model to show how imperfect public information and asymmetric beliefs about payoff-relevant parameters, agency conflicts, and the agent's implicit incentives to influence the principal's posterior beliefs through his unobservable actions interact to affect...

We develop a dynamic principal-agent model to show how imperfect public information and asymmetric beliefs about payoff-relevant parameters, agency conflicts, and the agent's implicit incentives to influence the principal's posterior beliefs through his unobservable actions interact to affect...

We consider an adverse selection model in which the agent can gather private information before the principal offers the contract. There are two scenarios. In scenario I, information gathering is a hidden action, while in scenario II, the principal observes the agent's information gathering...

We study a two-stage agency model in which the players take the role of the principal in turn. In the first stage, the board of the firm decides payment to the manager to induce him to set up and implement a project. In the second stage, the board evaluates the project to learn its value, and...

A principal who has a project with uncertain returns must retain and incentivize an agent using promise of future payments and information control. The agent's effort produces output and facilitates information gathering. The principal controls the informativeness of the agent's effort by...

We study a model of cheap talk with one substantive assumption: The sender's preferences are state independent. Our main observation is that such a sender gains credibility by degrading self-serving information. Using this observation, we examine the sender's benefits from communication, assess...

Most firms issue financial assets such as debt or equity (e.g. bonds or stock) to outside investors. While these financial assets differ greatly in their characteristics, their diversity has received little attention in the literature. Filling this important gap in the literature, this paper...

An entrepreneur contracts with a consultant, who is protected by limited liability, to supply information about the state of a project prior to investing in it. For a given level of investment, a good project succeeds with higher probability than a bad one. The entrepreneur makes an upfront...