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Delegation and Information Revelation

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Author Info
Axel Gautier
Dimitri Paolini

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Abstract

This paper analyzes, in a setup where only the control over actions is contractible, the rationale for delegation. An organization must take two decisions. The payoffs are affected by a random parameter, and only the agent knows its realization. If the principal delegates the control over the first decision tothe agent, his choice may indicate the information that he possesses. If the principal retains control over the second decision, discovering this information is valuable. Hence, this paper provides a new rationale for delegation: A transfer of control to the informed party can be used to discover private information.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 163 (2007)
Issue (Month): 4 (December)
Pages: 574-597
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200712)163:4_574:dair_2.0.tx_2-g

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June. [Downloadable!] (restricted)
  2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    Other versions:
  3. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May. [Downloadable!] (restricted)
  4. Milton Harris & Artur Raviv, . "Capital Budgeting and Delegation," CRSP working papers 343, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    Other versions:
  5. Legros Patrick, 1993. "Information Revelation in Repeated Delegation," Games and Economic Behavior, Elsevier, vol. 5(1), pages 98-117, January. [Downloadable!] (restricted)
  6. Melumad, Nahum & Mookherjee, Dilip & Reichelstein, Stefan, 1992. "A theory of responsibility centers," Journal of Accounting and Economics, Elsevier, vol. 15(4), pages 445-484, December. [Downloadable!] (restricted)
  7. Leonardo Felli, 1996. "Preventing Collusion Through Discretion," STICERD - Theoretical Economics Paper Series 303, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  8. Jean-Jacques Laffont & David Martimort, 1998. "Collusion and Delegation," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 280-305, Summer. [Downloadable!] (restricted)
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  9. Armstrong, M., 1994. "Delegation and Discretion," Discussion Paper Series In Economics And Econometrics 9421, Economics Division, School of Social Sciences, University of Southampton.
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  10. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-75, September. [Downloadable!] (restricted)
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  11. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May. [Downloadable!] (restricted)
  12. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-59, March. [Downloadable!] (restricted)
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  13. Freixas, Xavier & Guesnerie, Roger & Tirole, Jean, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Blackwell Publishing, vol. 52(2), pages 173-91, April. [Downloadable!] (restricted)
  14. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July. [Downloadable!] (restricted)
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  15. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  16. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  17. Martimort, David, 1997. " A Theory of Bureaucratization Based on Reciprocity and Collusive Behavior," Scandinavian Journal of Economics, Blackwell Publishing, vol. 99(4), pages 555-79, December. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. A. Gautier & Dimitri Paolini, 2007. "Delegation, Externalities and Organizational Design," Working Paper CRENoS 200710, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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This page was last updated on 2009-11-25.

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