Decision Rules and Optimal Delegation of Information Acquisition
AbstractThe paper analyzes the relationship between decision rules and information acquisition in decision-making processes. The setting under consideration is one where information acquisition and decision making are assigned to different agents and the decision-maker's preferences are not observable. The paper argues that the choice of the optimal organizational structure at the information acquisition stage depends on the degree of discretion granted to the decision-maker. High discretion ensures more flexibility but requires that information acquisition is assigned to the parties directly involved in the decision. Since they have conflicting interests, the parties provide a check against abusive decisions although at the cost of information manipulation. Low discretion introduces rigidity but allows the delegation of information acquisition to an unbiased agent who ensures truthful reports. Which of these two "optimal combinations" is preferable is then shown to depend on the probability of finding information when an agent searches. Our analysis sheds light on the stylized fact that Civil Law systems are generally associated with inquisitorial procedures whereas Common Law systems are combined with adversarial procedures.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 42.
Date of creation: 01 May 2000
Date of revision:
rules; control; manipulation; legal and judicial systems;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-05 (All new papers)
- NEP-LAW-2001-11-05 (Law & Economics)
- NEP-REG-2001-11-05 (Regulation)
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