Information Gathering by a Principal

34 Pages Posted: 1 Nov 2007

See all articles by Ed Nosal

Ed Nosal

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Multiple version iconThere are 2 versions of this paper

Date Written: September 2003


In the standard principal-agent model, the information structure is fixed. In this paper the author allows the principal to choose his level of informedness before he contracts with the agent. During the contracting phase, the agent never learns what the principal knows about the state of the world. This paper examines the cases in which the agent observes and does not observe the level of informedness that the principal chooses. The strategic nature of the model environment implies that there are both direct and indirect costs associated with the existence of high quality information. The implications for information gathering, investment, and welfare are examined for both cases.

Keywords: principal-agent model, efficiency of information acquisition

JEL Classification: D82, C72

Suggested Citation

Nosal, Ed, Information Gathering by a Principal (September 2003). FRB of Cleveland Working Paper No. 03-07, Available at SSRN: or

Ed Nosal (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

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