SEARCH

SEARCH BY CITATION

Keywords:

  • incomplete contracts;
  • property rights theory;
  • second-best investments;
  • value of information;
  • D23;
  • D80

ABSTRACT

This paper examines the ex ante value of information in the property rights model where the possibility exists that an investing agent can be provided with relevant information before investments are undertaken. When contracts are incomplete, from an ex ante perspective, informing the investing agent does not necessarily increase the expected surplus resulting from a relationship between two economic agents. The paper highlights the fact that the second-best nature of the problem that arises from contractual incompleteness can ensure this.