Skip to:
  1. Main navigation
  2. Main content
  3. Footer
Working Paper

Imperfect State Verification and Financial Contracting

Download pdf
Standard work on costly state verification, monitoring, and auditing generally assumes perfect signals about the underlying state, especially in questions about financial contracting. Relaxing that assumption has several intriguing consequences. Most imperfect audits turn out to be useless, and those that are useful cannot be ranked by conventional criteria such as Blackwell’s information measure. Thus, the notion of "more" or "less" information becomes problematic.
01.06.1995ISSN 2573-7953 WP 95-06DOI 10.26509/frbc-wp-199506

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Haubrich, Joseph G. 1995. “Imperfect State Verification and Financial Contracting.” Federal Reserve Bank of Cleveland, Working Paper No. 95-06. https://doi.org/10.26509/frbc-wp-199506