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Delegation and discretion

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  • Armstrong, Mark

Abstract

There are many situations in which a principal delegates decisions to a better-informed agent but does not choose to give full discretion. This paper discusses one reason why this might be desirable: the agent may have tastes that differ from those of the principal. Limiting the agent's discretion has the advantage that an untrustworthy agent is constrained from following policies that are disliked by the principal, but the disadvantage that trustworthy agents are then not permitted to carry out some desirable policies. It is shown that a greater risk of the agent being untrustworthy will lead to her being offered less discretion over policy. Applications of the model involve judicial sentencing policy, monetary policy, and pricing policy in a regulated industry.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17069.

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Date of creation: 1995
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Handle: RePEc:pra:mprapa:17069

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Related research

Keywords: Principal-Agent Problem; Delegation; Discretion; Mandatory Sentences; Monetary Policy; Regulation.;

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Cited by:
  1. Elisabetta Iossa & Giuliana Palumbo, 2002. "Decision Rules and Information Provision:Monitoring versus Manipulation," Public Policy Discussion Papers 02-17, Economics and Finance Section, School of Social Sciences, Brunel University.
  2. Martimort, David & Semenov, Aggey, 2006. "Continuity in Mechanism Design without Transfers," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  3. 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.
  4. Axel GAUTIER & Dimitri PAOLINI, 2001. "Delegation and Organizational Design," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  5. Kirsten Foss & Nicolai J. Foss, . "Authority and Discretion: Tensions, Credible Delegation, and Implications for New Organizational Forms," IVS/CBS Working Papers 2002-08, Department of Industrial Economics and Strategy, Copenhagen Business School.
  6. Currie, David & Levine, Paul L & Rickman, Neil, 1999. "Delegation and the Ratchet Effect: Should Regulators Be Pro-Industry?," CEPR Discussion Papers 2274, C.E.P.R. Discussion Papers.
  7. Aggey Semenov, 2012. "Delegation to a potentially uninformed agent," Working Papers 1215E, University of Ottawa, Department of Economics.
  8. John Vickers & Mark Armstrong, 2007. "A Model of Delegated Project Choice With Application to Merger Policy," Economics Series Working Papers 347, University of Oxford, Department of Economics.
  9. Pinghan Liang, 2010. "Transfer of Authority within Hierarchy," Levine's Working Paper Archive 661465000000000139, David K. Levine.
  10. Andreas Roider, 2006. "Delegation of Authority as an Optimal (In)Complete Contract," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(3), pages 391-411, September.
  11. Tracy R. Lewis, 1996. "Protecting the Environment When Costs and Benefits Are Privately Known," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 819-847, Winter.
  12. Martimort, David & Semenov, Aggey, 2008. "The informational effects of competition and collusion in legislative politics," Journal of Public Economics, Elsevier, vol. 92(7), pages 1541-1563, July.
  13. Marino, Anthony M., 2006. "Delegation versus an approval process and the demand for talent," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 487-503, May.
  14. Kirsten Foss & Nicolai J. Foss & Xose H. Vazquez-Vicente, 2003. ""Tying the Manager's Hands": How Firms can make Credible Commitments that make Opportunistic Managerial Intervention Less Likely," DRUID Working Papers 03-10, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  15. Rafael Gamboa, 1998. "Conditional Transfers to Promote Local Government Participation in Mexico," Economia Mexicana NUEVA EPOCA, , vol. 0(2), pages 189-227, July-Dece.

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