Ulric B. and Evelyn L. Bray Social Sciences Seminar

Abstract: We explore two highly interrelated models of "hard information." In the evidence-acquisition model, an agent with private information searches for evidence to show to the principal about her type. In the signal-choice model, a privately informed agent chooses an action which generates a random signal whose realization may be correlated with her type. We show that the signal-choice model is a special case and, under certain conditions, a reduced form of the evidence-acquisition model. We develop tools for characterizing optimal mechanisms for these models by giving conditions under which some aspects of the principal's optimal choices can be identified only from the information structure, without regard to the utility functions or the principal's priors. We also give a novel result on conditions under which there is no value to commitment for the principal.