<p>I'm not sure what exactly you're looking for, but here are some wild guesses:</p>
<ul>
<li>Bolton and Dewatripont (2005) <a href="https://mitpress.mit.edu/books/contract-theory" rel="noreferrer"><em>Contract Theory</em></a>, MIT Press. [Probably Chapters 5 and 6]</li>
<li>Maskin and Tirole (1990) &quot;<a href="https://www.jstor.org/stable/2938208" rel="noreferrer">The Principal-Agent Relationship with an Informed Principal: The Case of Private Values</a>&quot;, <em>Econometrica</em> 58: 379-409.</li>
<li>Maskin and Tirole (1992) &quot;<a href="https://www.jstor.org/stable/2951674" rel="noreferrer">The Principal-Agent Relationship with an Informed Principal, II: Common Values</a>&quot;, <em>Econometrica</em> 60: 1-42.</li>
<li>Myerson (1983) &quot;<a href="https://www.jstor.org/stable/1912116" rel="noreferrer">Mechanism Design by an Informed Principal</a>&quot;, <em>Econometrica</em> 51: 1767-1797.</li>
</ul>

CC BY-SA 4.0
2021-02-04T19:04:04.403Z
2021-02-04T19:04:04.403Z
Herr K.
<p>Contracting with an informed principal is not so easy because the agent can learn about the principal's type from the kind of contract offered. This introduces signaling, which can quickly get messy.</p>
<p>The other answer already mentioned the three seminal papers in that literature. I think Myerson's paper fits best for your goal to understand moral hazard with an informed principal. In chapter 10 of <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674341166&amp;content=toc" rel="nofollow noreferrer">his book</a>, he also discusses the informed-principal problem.</p>
<p>Tymofiy Mylovanov (who has a bunch of papers on informed principals) took <a href="https://sites.google.com/site/tmylovanov/informed-principal" rel="nofollow noreferrer">this outdated list of papers</a> off his homepage, but you can still find it. The list is quite old and most papers are surely published by now.</p>
<p>Specifically on moral hazard, two papers come to my mind:</p>
<ul>
<li><a href="https://www.sciencedirect.com/science/article/pii/S0022053115000836?casa_token=FqP2GFWyEAEAAAAA:10YP8wtWcDvMBRcqt6JtFefyPDzKHoJLOzz6x4mN_T2u_M6l80BRBkWscssI8uFlnnbU4S2NAg" rel="nofollow noreferrer">Wagner, Mylovanov &amp; Tröger (JET 2015) : Informed-principal problem
with moral hazard, risk neutrality, and no limited liability</a> and</li>
<li><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3083159" rel="nofollow noreferrer">Mekonnen (working paper, now-ish): Informed Principal, Moral Hazard,
and Limited Liability</a></li>
</ul>

CC BY-SA 4.0
2021-02-05T12:41:43.120Z
2021-02-05T12:41:43.120Z
Bayesian
<p>I was studying Laffont &amp; Martimort textbook for a paper, but their section on moral hazard contract with informed principals assumes that the principal only knows his own type after contracting.</p>
<p>But I need a model where principal knows the type <strong>before</strong> contracting (probably with signalling issues).</p>
<p>Laffont &amp; Martimort manuscript reads that such contract would be explored in a Vol. III of the textbook, but I think this volume do not exist (as Laffont got cancer and deceased right after the publishing of Vol. I). Is there any other textbook or paper that describes this model?</p>
<p>Thank you.</p>

<asymmetric-information><principal-agent><contract-theory><signaling>
Signalling in a moral hazard contract with informed principals (that know their own type before contracting)
Iriki
# Signalling in a moral hazard contract with informed principals (that know their own type before contracting)

(Asked by: username_0 on 2021-02-04)

I was studying Laffont & Martimort textbook for a paper, but their section on moral hazard contract with informed principals assumes that the principal only knows his own type after contracting.

But I need a model where principal knows the type **before** contracting (probably with signalling issues).

Laffont & Martimort manuscript reads that such contract would be explored in a Vol. III of the textbook, but I think this volume do not exist (as Laffont got cancer and deceased right after the publishing of Vol. I). Is there any other textbook or paper that describes this model?

Thank you.

**Tags:** asymmetric-information, principal-agent, contract-theory, signaling


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## 2 answers

### Answer by username_1 on 2021-02-04. Score: 5

I'm not sure what exactly you're looking for, but here are some wild guesses:

* Bolton and Dewatripont (2005) [*Contract Theory*](https://mitpress.mit.edu/books/contract-theory), MIT Press. [Probably Chapters 5 and 6]
* Maskin and Tirole (1990) "[The Principal-Agent Relationship with an Informed Principal: The Case of Private Values](https://www.jstor.org/stable/2938208)", *Econometrica* 58: 379-409.
* Maskin and Tirole (1992) "[The Principal-Agent Relationship with an Informed Principal, II: Common Values](https://www.jstor.org/stable/2951674)", *Econometrica* 60: 1-42.
* Myerson (1983) "[Mechanism Design by an Informed Principal](https://www.jstor.org/stable/1912116)", *Econometrica* 51: 1767-1797.


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### Answer by username_2 on 2021-02-05. Score: 4

Contracting with an informed principal is not so easy because the agent can learn about the principal's type from the kind of contract offered. This introduces signaling, which can quickly get messy.

The other answer already mentioned the three seminal papers in that literature. I think Myerson's paper fits best for your goal to understand moral hazard with an informed principal. In chapter 10 of [his book](https://www.hup.harvard.edu/catalog.php?isbn=9780674341166&content=toc), he also discusses the informed-principal problem.

Tymofiy Mylovanov (who has a bunch of papers on informed principals) took [this outdated list of papers](https://sites.google.com/site/tmylovanov/informed-principal) off his homepage, but you can still find it. The list is quite old and most papers are surely published by now.

Specifically on moral hazard, two papers come to my mind:

* [Wagner, Mylovanov & Tröger (JET 2015) : Informed-principal problem
  with moral hazard, risk neutrality, and no limited liability](https://www.sciencedirect.com/science/article/pii/S0022053115000836?casa_token=FqP2GFWyEAEAAAAA:10YP8wtWcDvMBRcqt6JtFefyPDzKHoJLOzz6x4mN_T2u_M6l80BRBkWscssI8uFlnnbU4S2NAg) and
* [Mekonnen (working paper, now-ish): Informed Principal, Moral Hazard,
  and Limited Liability](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3083159)


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