Publications [#266971] of Tracy R. Lewis

Journal Articles

1. Lewis, TR; Sappington, DEM, Information management in incentive problems, Journal of Political Economy, vol. 105 no. 4 (January, 1997), pp. 796-821, University of Chicago Press, ISSN 0022-3808 [repository], [doi]
   (last updated on 2023/11/06)

   Abstract:
   We extend the standard procurement model to examine how an agent is optimally induced to acquire valuable planning information before he chooses an unobservable level of cost-reducing effort. Concerns about information acquisition cause important changes in standard incentive contracts. Reward structures with extreme financial payoffs arise, and super-high-powered contracts are coupled with contracts that entail pronounced cost sharing. However, if the principal can assign the planning and production tasks to two different agents, then all contracting distortions disappear and, except for forgone economies of scope, the principal achieves her most preferred outcome.