TY - JOUR
T1 - A note on robust procurement contracts
AU - Rodivilov, Alexander
N1 - Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2021/4
Y1 - 2021/4
N2 - We study a procurement problem where both a principal and an agent share uncertainty regarding the cost at the outset. After being offered a contract, the agent privately observes an informative signal of the marginal cost. The principal neither knows the signal distribution nor has a prior belief about possible signal distributions. We characterize a procurement contract that is robust to the principal's uncertainty about the agent's information structure. The principal's worst distribution either fully reveals to the agent that the cost is low or makes him just pessimistic enough to reject the contract. In the former case, the agent accepts the contract and produces less than what he would have without the signal.
AB - We study a procurement problem where both a principal and an agent share uncertainty regarding the cost at the outset. After being offered a contract, the agent privately observes an informative signal of the marginal cost. The principal neither knows the signal distribution nor has a prior belief about possible signal distributions. We characterize a procurement contract that is robust to the principal's uncertainty about the agent's information structure. The principal's worst distribution either fully reveals to the agent that the cost is low or makes him just pessimistic enough to reject the contract. In the former case, the agent accepts the contract and produces less than what he would have without the signal.
KW - Bayesian persuasion
KW - Information acquisition
KW - Optimal contracts
UR - http://www.scopus.com/inward/record.url?scp=85101310039&partnerID=8YFLogxK
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U2 - 10.1016/j.econlet.2021.109785
DO - 10.1016/j.econlet.2021.109785
M3 - Article
AN - SCOPUS:85101310039
SN - 0165-1765
VL - 201
JO - Economics Letters
JF - Economics Letters
M1 - 109785
ER -