Abstract :
In the standard principal–agent model, the information structure is fixed. In
this article the principal can choose to acquire additional information about the
state of the world before he contracts with an agent. In the event that the principal
acquires this information, the agent never learns what the principal knows about
the state of the world. I examine cases where the agent can and cannot observe
whether the principal has acquired the additional information. The implications
for risk sharing, information acquisition, investment, and welfare are examined
for both cases.
