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Journal Articles International Journal of Industrial Organization Year : 2008

Gathering Information before signing a contract: A screening perspective

Abstract

A principal has to choose among several agents to fulfill a task and then provide the right incentives to perform it. Agents do not a priori know how competent they are for the task. It is shown that the principal should propose a contract that leads the agents to gather information about their competence prior to signing the contract. This insight is in sharp contrast with Crémer and Khalil [J. Crémer, F. Khalil: "Gathering information before signing a contract", American Economic Review, 82, 1992, 566-578] who consider a setup with one agent (or alternatively a setup with several agents in which the private information commonly applies to all agents). It emerges because, in our private value setup, information acquisition accompanied by a proper screening device increases the chance that the principal will pick a competent agent.

Dates and versions

halshs-00754311 , version 1 (20-11-2012)

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Cite

Olivier Compte, Philippe Jehiel. Gathering Information before signing a contract: A screening perspective. International Journal of Industrial Organization, 2008, 26 (1), pp.206-212. ⟨10.1016/j.ijindorg.2006.11.002⟩. ⟨halshs-00754311⟩
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