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Decision Rules and Information Provision:Monitoring versus Manipulation

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  • Elisabetta Iossa

    ()

  • Giuliana Palumbo

    ()

Abstract

The paper focuses on the organization of institutions designed to resolve disputes between two parties, when some information is not veri…able and decision makers may have vested preferences. It shows that the choice of how much discretional power to grant to the decision maker and who provides the information are intrinsically related. Direct involvement of the interested parties in the supply of information enhances monitoring over the decision maker, although at the cost of higher manipulation. Thus, it is desirable when the decision maker is granted high discretion. On the contrary, when the decision maker has limited discretional power, information provision is better assigned to an agent with no direct stake. The analysis helps to rationalize some organizational arrangements that are commonly observed in the context of judicial and antitrust decision-making.

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Bibliographic Info

Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 02-17.

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Length: 32 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:bru:bruppp:02-17

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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK

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  1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  2. Armstrong, M., 1994. "Delegation and discretion," Discussion Paper Series In Economics And Econometrics 9421, Economics Division, School of Social Sciences, University of Southampton.
  3. Cowen, T. & Glazer, A. & Zajc, K., 1995. "Credibility May Require Discretion, not Rules," Papers, California Irvine - School of Social Sciences 94-95-27, California Irvine - School of Social Sciences.
  4. Laffont, Jean-Jacques & Tirole, Jean, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 1089-127, November.
  5. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. Palumbo, Giuliana, 2006. "Optimal duplication of effort in advocacy systems," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 112-128, May.
  7. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(3), pages 473-91, June.
  8. Laffont, Jean-Jacques & Tirole, Jean, 1990. "The Politics of Government Decision Making: Regulatory Institutions," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 6(1), pages 1-31, Spring.
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Cited by:
  1. Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2003. "Should Courts Always Enforce What Contracting Parties Write?," PIER Working Paper Archive 03-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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