Optimal contract for outsourcing information acquisition

Abstract

We consider how a principal can optimally outsource information acquisition to an agent in a dynamic environment when the principal can observe neither the agent’s effort of collecting information nor signal realizations. Neither initial transaction nor interim payments are allowed to prevent the principal from effectively delegating her decision to the agent. Focusing on scoring rules, we find a contract that allows the principal to achieve the first best: the principal can induce the agent not only to exert effort but also to report a right belief at the right time.