DP13868 Information Design with Agency

Author(s): Jacopo Bizzotto, Eduardo Perez-Richet, Adrien Vigier
Publication Date: July 2019
Keyword(s): Agency Cost, Information Acquisition, information design, moral hazard
JEL(s): C72, D82
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13868

We consider a general information design problem in which the task of producing information is delegated to an agent who can privately choose between the procedure designed by the principal and a default procedure. Procedures are constrained as to which messages they use, and possibly how they may be used. The principal can incentivize the agent via transfers conditioned on messages. This gives rise to a moral hazard problem in which the principal faces a trade-off between generating information that is persuasive in the continuation game, or generating information about the choice of the agent so as to lower the cost of agency. We provide a general methodology to solve such problems, and characterize an optimal procedure. We apply our results to information acquisition and persuasion examples.