Motivating Agents to Acquire Information

Abstract

It is difficult to motivate advisors to acquire information through standard performance-contracts when outcomes are uncertain and/or only observed in the distant future. Decision-makers may however exploit advisors’ desire to influence the outcome. We build a model in which a decision-maker and two advisors care about the decision’s consequences, which depend on an unknown parameter. To reduce uncertainty, the advisors can produce information of low or high accuracy; this information becomes public but the decision-maker cannot assess its accuracy with certainty, and monetary transfers are unavailable. Moreover, the information the two advisors produce may be conflicting. We show the optimal decision-rule involves making the final decision exceedingly sensitive to the jointly provided information.