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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.
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Submitted on : Tuesday, November 20, 2012 - 8:54:17 AM
Last modification on : Friday, April 29, 2022 - 10:13:01 AM

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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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