The value of information in an agency model with moral hazard

Silvers, Randolph 2004, The value of information in an agency model with moral hazard, in Selected papers from the 33rd Australian Conference of Economists, Sydney Sept. 27-30, 2004, Economic Society of Australia, Sydney, N.S.W., pp. 1-40.

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Title The value of information in an agency model with moral hazard
Author(s) Silvers, Randolph
Conference name Australian Conference of Economists (33rd : 2004 : Sydney, Australia)
Conference location Sydney, N.S.W.
Conference dates 27-30 September 2004
Title of proceedings Selected papers from the 33rd Australian Conference of Economists, Sydney Sept. 27-30, 2004
Editor(s) Sheen, Jeffrey
Wright, Donald
Publication date 2004
Start page 1
End page 40
Publisher Economic Society of Australia
Place of publication Sydney, N.S.W.
Keyword(s) moral hazard
principal-agent
informed principal
information
Summary I show that the principal and the agent may each prefer that the principal or the agent has imperfect information about the principal's technology in a principal-agent environment with moral hazard. Principals expend considerable resources on data cumulation and analysis. However, such investments in information acquisition are benecial only if the agent will know that the principal is not ignorant or it allows the principal to implement a dierent action. When the principal is perfectly informed about her technology, the agent prefers to be ignorant. In addition, the value of perfect information for the agency is negative if the principal would implement the same action with either possible technology. I also investigate the dierences between ex ante and ex post contracting, and the ramications of the principal being ignorant or potentially ignorant about the technology. Finally, I determine if the principal's utility varies continuously with the degree of informativeness of the agent about the principal's technology. In this vein, I determine whether the agent's uncertainty may make the principal better o if she has the less informative technology.
ISBN 1864876646
9781864876642
Language eng
Field of Research 140299 Applied Economics not elsewhere classified
HERDC Research category E1 Full written paper - refereed
ERA Research output type E Conference publication
Persistent URL http://hdl.handle.net/10536/DRO/DU:30005318

Document type: Conference Paper
Collection: School of Accounting, Economics and Finance
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