Contracting for information under imperfect commitment

Vijay Krishna, John Morgan

Research output: Contribution to journalArticlepeer-review

31 Scopus citations

Abstract

We study optimal contracting under imperfect commitment in a model with an uninformed principal and an informed agent. The principal can commit to pay the agent for his advice but retains decision-making authority. Under an optimal contract, the principal should (i) never induce the agent to fully reveal what he knows-even though this is feasible-and (ii) never pay the agent for imprecise information. We compare optimal contracts under imperfect commitment to those under full commitment as well as to delegation schemes. We find that gains from contracting are greatest when the divergence in the preferences of the principal and the agent is moderate.

Original languageEnglish (US)
Pages (from-to)905-925
Number of pages21
JournalRAND Journal of Economics
Volume39
Issue number4
DOIs
StatePublished - Dec 2008

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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