Usefulness Lost: Aggregating Information with Differing Levels of Verifiability

Abstract

In this paper, we study information asymmetries about verifiability between a principal and an agent. Our main result is that an information asymmetry about verifiability not only reduces the usefulness of a given performance measure for stewardship purposes, it can completely destroy that performance measure's usefulness.

Keywords: Stewardship, Verifiability, Information Asymmetry

JEL Classification: C70, D82, M41