Australasian Microeconomic Theory Seminar - Claudio Mezzetti (UQ)

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Alexandru Nichifor

ametsinitiative@gmail.com

Title: Contracting over Persistent Information

Abstract. We consider a dynamic principal-agent problem, 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 the principal’s
most preferred action, e.g., to work hard on the principal’s task. 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.