Delegation and discretion
AbstractThere 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 InfoPaper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 9421.
Date of creation: 01 Jan 1994
Date of revision:
Other versions of this item:
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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