Noémie Cabau
Corvinus University, Hungary
Dynamic Games and Applications Seminar
Signaling Effort: Information Structures in a Principal-Agent Model
Oct 10, 2024 11:00 AM — 12:00 PM
Zoom webinar link
We consider a principal-agent relationship where only information messages are contractible, and the agent can design a signal about his effort. The principal may have access to an outside signal that escapes the agent’s control and offers a contract based on the joint signal. In equilibrium, the agent’s signal is informative only if the default contract based on the outside signal only exposes him to a severe and likely punishment. We show that an optimal and informative signal provides weak (strong) evidence of high (low) effort. Surprisingly, the principal does not always benefit from more precise outside signals.
(With Arseniy Samsonov.)