Decision Sciences
8 years ago

Principal's subjective info fails to bridge gap in optimal contracts.

Theoretical Economics Letters
Limit of the Principal’s Information
Kazumi Hori

Paper Summary

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The article explores how a boss's personal knowledge can affect a worker's private information. The study shows that the boss's subjective information doesn't help reduce the information gap between them. In fact, even if they are somewhat related, the best contract doesn't depend on the boss's personal knowledge.