Year: 2020
Type: preprint
Abstract: We consider a dynamic moral hazard problem between a principal and an agent, where the sole instrument the principal has to incentivize the agent is the disclosure of information. The principal aims at maximizing the (discounted) number of times the agent chooses a particular action, e.g., to work hard. We show that there exists an optimal contract, where the principal stops disclosing information as soon as its most preferred action is a static best reply for the agent or else continues disclosing information until the agent perfectly learns the principal's private information. If the agent perfectly learns the state, he learns it in finite time with probability one; the more patient the agent, the later he learns it.
Source: arXiv (Cornell University)
Language: English
Topic: Game Theory and Applications
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
Awards: G255783604, Idex Paris-Saclay, G3252149735, G334658794, G3417506984, Réguler l'économie au service de la société, G3934364630, G4656594441, G4725581414, G4866930200, G5054402517, G5750979629, Ambiguity in Dynamic Environments, Information and market design: mediation and analogical argumentation, Communication and Information in Games on Networks, G910694584
OpenAlex ID: W3121511441