Unveiling the Secrets of Contract Design: How Agents Manipulate Buyer's Beliefs
The article explores how to create effective incentives for contract designers. When a buyer hires someone to make a contract, the designer's effort affects how well the contract works. The designer can influence the buyer's beliefs because the buyer can't see the designer's effort. Also, the designer knows more at the start, which can cause problems. The level of detail in the contract depends on how much effort the designer puts in. This can explain some real-world situations and how contracts are made.