3
$\begingroup$

I was studying Laffont & Martimort textbook for a paper, but their section on moral hazard contract with informed principals assumes that the principal only knows his own type after contracting.

But I need a model where principal knows the type before contracting (probably with signalling issues).

Laffont & Martimort manuscript reads that such contract would be explored in a Vol. III of the textbook, but I think this volume do not exist (as Laffont got cancer and deceased right after the publishing of Vol. I). Is there any other textbook or paper that describes this model?

Thank you.

$\endgroup$
5
$\begingroup$

I'm not sure what exactly you're looking for, but here are some wild guesses:

$\endgroup$
4
$\begingroup$

Contracting with an informed principal is not so easy because the agent can learn about the principal's type from the kind of contract offered. This introduces signaling, which can quickly get messy.

The other answer already mentioned the three seminal papers in that literature. I think Myerson's paper fits best for your goal to understand moral hazard with an informed principal. In chapter 10 of his book, he also discusses the informed-principal problem.

Tymofiy Mylovanov (who has a bunch of papers on informed principals) took this outdated list of papers off his homepage, but you can still find it. The list is quite old and most papers are surely published by now.

Specifically on moral hazard, two papers come to my mind:

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.