The Economics of Clear Advice and Extreme Options

S-Tier
Journal: Review of Economic Studies
Year: 2005
Volume: 72
Issue: 4
Pages: 1173-1198

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

I study a principal-agent model in which the agent collects information and then chooses a verifiable action. I show that the principal can find it desirable to constrain the agent's action set even though there is no disagreement about the ranking of actions ex post. The elimination or penalization of "intermediate" actions, which are optimal when information is poor, improves incentives for information collection. I characterize optimal action sets when the agent is infinitely risk averse with respect to income shocks and optimal incentive schemes when the agent is risk neutral. Copyright 2005, Wiley-Blackwell.

Technical Details

RePEc Handle
repec:oup:restud:v:72:y:2005:i:4:p:1173-1198
Journal Field
General
Author Count
1
Added to Database
2026-01-29