On the value of information in the presence of moral hazard

This paper shows that the marginal value of a "small amount of non-output information" is generally non-positive in the context of the standard principal-agent model involving moral hazard, which suggests a non-concavity in the value of information. However, when both the principal and the agent are risk neutral, even a small amount of non-output information may exhibit a positive incremental value in presence of a liability constraint. © Springer-Verlag 2007.