About: 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.   Goto Sponge  NotDistinct  Permalink

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  • 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.
subject
  • Disclosure
  • Insurance
  • Privacy
  • Anonymity
  • Data security
  • Data laws
  • Identity documents
  • Personal life
  • Market failure
  • Financial risk
  • United States housing bubble
  • Asymmetric information
  • Anti-patterns
  • Ethically disputed business practices
  • Adoption reunion
  • Contract bridge bidding
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