Sequential Communication in Agencies
REVIEW OF ACCOUNTING STUDIES, Vol. 2, No. 2, 1997
Posted: 17 Sep 1997
This paper examines a principal-agent model in which the agent receives a sequence of two signals about the future outcome from his actions. Conditions are identified under which sequential communication (signals reported when received) is strictly preferred to simultaneous communication (signals only reported after all are received). If the second signal does not provide additional information about the outcome, then it can only be valuable if its report is verified. If the first signal is informative about the second and the second provides additional information about the outcome, then there exist settings in which sequential unverified reporting is strictly valuable.
JEL Classification: M41, M49, D82
Suggested Citation: Suggested Citation