Information and Delay in an Agency Model Articles uri icon



publication date

  • June 2010

start page

  • 598

end page

  • 615


  • 3


  • 41

International Standard Serial Number (ISSN)

  • 0741-6261

Electronic International Standard Serial Number (EISSN)

  • 1756-2171


  • This article studies how delay in contracting depends on an exogenous signal. The agent whose cost is his private information may produce in the first period or be delayed until the second period. A
    signal about the cost of the agent is available between the two periods.
    The quality of the good can vary; in the benchmark case of no signal,
    the principal offers the standard Baron-Myerson contract and there is no
    delay. Delay is determined by the considerations at the margin and may
    increase or decrease with a better signal. The value of information can
    be negative, as a better signal may aggravate the principal's commitment
    problem. A better signal may also increase the agent's rent and
    decrease social welfare.