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Delegation of information verification

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  • Kim, Doyoung

Abstract

An agent may manipulate information when transmitting it to the principal. A direct response to this problem is to verify the information. The paper explores a situation where the principal engages in information verification herself or alternatively delegates it to the agent. The paper finds that delegated verification can be optimal if the agent has to expend costly effort to acquire information before verifying it. Delegated verification promotes the agent's incentive for information acquisition. The paper also finds that delegated verification is more likely to be optimal if the agent is more biased.

Suggested Citation

  • Kim, Doyoung, 2013. "Delegation of information verification," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 488-500.
    • Handle: RePEc:eee:indorg:v:31:y:2013:i:5:p:488-500
    DOI: 10.1016/j.ijindorg.2013.08.003
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    References listed on IDEAS

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    Cited by:

    1. Kräkel, Matthias, 2021. "On the delegation of authority," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 965-981.

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    More about this item

    Keywords

    Costly state verification; Delegation; Information acquisition;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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