Allocation of Decision-Making Authority with Principal's Reputation Concerns
AbstractThis paper analyzes the allocation of decision-making authority when the principal has reputation concerns. The principal can either keep the authority and consult the agent (an expert), or delegate the authority to the agent; however, the outside evaluator cannot observe the allocation of authority. Hence, delegation can provide a way to manipulate the principal's ex post reputation. In general, the principal keeps the authority too often when she has the opportunity of delegation. When the evaluator believes that the agent may make the decision sometimes, the principal has less incentive to make the right decisions
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 701.
Date of creation: 11 Aug 2004
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Delegation; Principal's Reputation Concerns; Cheap Talk;
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; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-30 (All new papers)
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