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Veto-Based Delegation

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  • Mylovanov, Tymofiy
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    Abstract

    In a principal-agent model with hidden information and no monetary transfers, I establish the Veto-Power Principle: any incentive-compatible outcome can be implemented through veto-based delegation with an endogenously chosen default decision. This result demonstrates the exact nature of commitment powers required by the principal: (1) to design the default outcome and (2) to ensure that she has almost no formal control over the agent's decisions.

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    File URL: http://epub.ub.uni-muenchen.de/13422/1/129.pdf
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    Bibliographic Info

    Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 129.

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    Date of creation: Jan 2005
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    Handle: RePEc:trf:wpaper:129

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    Related research

    Keywords: veto power; asymmetric information; principal-agent relationship; no monetary transfers.;

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    References

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    1. Anthony M. Marino, 2007. "Delegation versus Veto in Organizational Games of Strategic Communication," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(6), pages 979-992, December.
    2. Alonso, Ricardo & Matouschek, Niko, 2005. "Optimal Delegation," CEPR Discussion Papers 5289, C.E.P.R. Discussion Papers.
    3. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
    4. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
    5. Helmut Bester & Roland Strausz, . "Imperfect Commitment and the Revelation Principle," Papers 004, Departmental Working Papers.
    6. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
    7. Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    Cited by:
    1. Semenov, Aggey, 2008. "Bargaining in the Appointment Process, Constrained Delegation and the Political Weight of the Senate," MPRA Paper 6988, University Library of Munich, Germany.

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