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- Title
Information and delay in an agency model.
- Authors
Drugov, Mikhail
- Abstract
This article studies how delay in contracting depends on an exogenous signal. The agent whose cost is his private information may produce in the first period or be delayed until the second period. A signal about the cost of the agent is available between the two periods. The quality of the good can vary; in the benchmark case of no signal, the principal offers the standard Baron-Myerson contract and there is no delay. Delay is determined by the considerations at the margin and may increase or decrease with a better signal. The value of information can be negative, as a better signal may aggravate the principal's commitment problem. A better signal may also increase the agent's rent and decrease social welfare.
- Subjects
BUSINESS negotiation; BENCHMARKING (Management); RENT; PUBLIC welfare; CONTRACTS
- Publication
RAND Journal of Economics (Wiley-Blackwell), 2010, Vol 41, Issue 3, p598
- ISSN
0741-6261
- Publication type
Article
- DOI
10.1111/j.1756-2171.2010.00113.x