Published in

Oxford University Press, The Review of Economic Studies, 2(82), p. 736-761, 2014

DOI: 10.1093/restud/rdu040

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On Transparency in Organizations

Journal article published in 2014 by Philippe Jehiel
This paper is available in a repository.
This paper is available in a repository.

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Abstract

When is it best for the Principal to commit to not disclosing all that he/she knows in moral hazard interactions? I show that whenever the Agent would choose the same action under complete information at several distinct states, then full transparency can generically be improved upon. This implies that full transparency is generically suboptimal whenever the dimension of the information held by the Principal exceeds the dimension of the Agent's action. In a simple class of problems, I make further progress on the best disclosure policy assuming the Principal can either disclose fully the state or remain silent.