Investment and Screening under Asymmetric Endogenous Information

@inproceedings{Gonzalez2002InvestmentAS,
  title={Investment and Screening under Asymmetric Endogenous Information},
  author={Patrick Gonzalez},
  year={2002}
}
This paper provides an analysis of screening contracts in a complete but imperfect information environment as opposed tothe usual incomplete information (Bayesian) environment. An agent faces a hold-up situation while making a cost-reducing specific investment that is not observed by the principal. To prevent the hold-up, the agent randomizes his investment strategy and the principal offers a screening contract. The informational rents provided by the equilibrium contract finance the investment… CONTINUE READING