Delegation and information revelation
AbstractThis paper addresses the question of delegation in an organization where there is an initial asymmetry of information between the principal and the agent. We assume that the principal cannot use revelation techniques à la Baron Myerson to elicit agent's superior information and in contrast, we posit that the decision and the state of the world parameter cannot be contracted for. With these simple contracts, we show that delegation is an alternative to contracting to elicit agent's information. We can show that delegated decisions completely reveal the state of the world to the principal. Therefore the principal can extract agent's information by giving up the control right over some decisions. As the organization takes a sequence of decisions, the information learned by the principal can be used for the other decisions. So delegation is only partial: the principal delegates some decisions and keeps control over other.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2000015.
Date of creation: 01 Sep 2000
Date of revision:
Asymmetric information; Delegation; Incomplete contracts;
Other versions of this item:
- Axel Gautier & Dimitri Paolini, 2007. "Delegation and Information Revelation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 574-597, December.
- GAUTIER, Axel & PAOLINI, Dimitri, . "Delegation and information revelation," CORE Discussion Papers RP -2018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Axel Gautier & Dimitri Paolini, 2000. "Delegation and Information Revelation," Econometric Society World Congress 2000 Contributed Papers 1292, Econometric Society.
- Axel Gautier & Dimitri Paolini, 2002. "Delegation and Information Revelation," Bonn Econ Discussion Papers bgse18_2002, University of Bonn, Germany.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-02-10 (All new papers)
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