Ex post information rents in sequential screening

• Published in: Games and economic behavior Vol. 90; pp. 257 - 273
• Main Authors: Krähmer, Daniel, Strausz, Roland
• Format: Journal Article
• Language: English
• Published: Duluth Elsevier Inc 01.03.2015; Academic Press
• Subjects: Agency theory; Disclosure; Economic models; Information disclosure; Information rents; Sequential screening; Studies; Sequential screening; H57; Information rents; Information disclosure; D82
• ISSN: 0899-8256; 1090-2473
• DOI: 10.1016/j.geb.2015.03.003

We study ex post information rents in sequential screening models where the agent receives private ex ante and ex post information. The principal has to pay ex post information rents for preventing the agent to coordinate lies about his ex ante and ex post information. When the agent's ex ante information is discrete, these rents are positive, whereas they are zero in continuous models. Consequently, full disclosure of ex post information is generally suboptimal. Optimal disclosure rules trade off the benefits from adapting the allocation to better information against the effect that more information aggravates truth-telling. •We study ex post information rents in sequential screening models.•Such rents prevent a coordination of lies about ex ante and ex post information.•When the agent's ex ante information is continuous, these rents are zero.•When the agent's ex ante information is discrete, these rents are strictly positive.