Information provision before a contract is offered

- We study the agent's incentives to provide information before contracting.
- We investigate how the agent's expected rent changes with the principal's belief.
- We show that the agent may provide a bad signal to the principal.
- The principal is better-off when her information is updated.

This paper considers an agency model in which the agent can update the principal's belief before the contract is offered. We identify that the agent who has a bad potential to perform the task has a small chance to receive information rent, but if he receives it, he receives a large amount. Thus, the agent may choose to provide more information that shifts the principal's belief to the negative direction if the prior belief is optimistic.