Value of communication in agencies (Q1119137)
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scientific article; zbMATH DE number 4097063
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Value of communication in agencies |
scientific article; zbMATH DE number 4097063 |
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Value of communication in agencies (English)
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1989
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Focusing on an agency model in which the agent receives private information prior to contracting, we analyze whether the principal benefits from offering the agent a menu of contracts. We show that, under certain conditions, the constraints imposed by the self-selection requirement are so restrictive that a menu of contracts has no value, i.e., the principal might as well offer a single contract based only on some jointly observed outcome. Conversely, we identify cases where a menu of contracts is valuable because it allows the principal to implement a more efficient incentive structure.
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informational economics
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principal-agent problem
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agency model
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private information
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self-selection
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