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Informed principal, moral hazard, and the value of a more informative technology
journal contributionposted on 2002-02-01, 00:00 authored by H Chade, Randolph Silvers
We analyze a principal-agent model with moral hazard in which the principal has private information about the technology. We characterize Perfect Bayesian Equilibria of the contracting game that possess the following properties: (i) a principal with a more informative technology ends up earning less profits than a principal with a less informative one does; (ii) compared to the complete information case, the actions implemented by the privately informed principal can be distorted; (iii) the agent can end up being better off when the principal has private information.