Economic Theory and Experiments Seminar- Nawaaz Khalfan (MONASH)

Title: Sequential Information Acquisition and Optimal Search

Abstract: A principal receives an unknown reward from allocating to an agent who has private information about the reward. Prior to allocating, the principal may elicit a report from the agent and inspect them at a cost, but must do so without transfers. When the private information is noisy, the mechanism that maximizes the principal's expected return at most segments signals into two groups; inspecting and conditionally allocating to high types, and partially allocating to low types. We prove this by reformulating Weitzman (1979) and extending it to a mechanism design problem through the reduced-form.