Negative value of information in an informed principal problem with independent private values

Economics

Further details

This note demonstrates that in a principal-agent environment with independent pri- vate values and generic payo®s, the mechanism implemented by an informed principal is not ex-ante optimal. This result implies that in (generic) settings where the principal can covertly acquire private information before selecting a mechanism, she will fail to select an ex-ante optimal mechanism. Furthermore, the principal is indi®erent whether to become informed before or after selecting a mechanism.