Ex ante moral hazard and ex post adverse selection with soft information
نویسنده
چکیده
We reverse the standard sequence of a complete contracting model: first the agent takes an action, then she alone observes the stochastic outcome and sends a message to the principal. Presuming of the validity of the Revelation Principle, the optimal (direct) mechanism with audit requires a two-part tariff to be offered to the agent, which weakens the ex ante incentives for effort. We then establish an equivalence result for the agent between a direct revelation mechanism and the general mechanism, and provide a necessary and sufficient condition for the Revelation Principle to hold.
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