STRATEGIC INFORMATION GATHERING BEFORE A CONTRACT IS OFFERED

In a Baron-Myerson setup, we study a situation where an agent is initi ally uninformed, but can, at a cost, acquire information about the sta te of nature before the principal offers him a contract. For intermedi ate values of the cost of acquiring information, the agent's equilibri um strategy will be a mixed strategy: He will acquire information with a probability strictly between 0 and 1. We identify the contract that the principal will offer to such a ''maybe informed'' agent. (C) 1998 Academic Press.