AbstractHow should a principal delegate a task to an agent? This paper studies the principal's choice of an agent's freedom of action as an incentive problem. The optimal contract simultaneously copes with two problems of asymmetric information: the agent must be motivated to acquire productive information and he must be given incentives to use the information in the principal's interest. In order to provide the agent with proper incentives for information acquisition the principal may optimally choose to curtail the agent's authority over decision making even if there are no conflicts with respect to the decision itself. As a result the relationship between the severity of the conflict of principal's and agent's interests and the agent's optimal freedom of action is non-monotonic. Our theory provides a rationale for commonly observed phenomena such as 'demanding clear statements' from advisors or 'imposing an innovation bias' on an organizational structure.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 00-29.
Length: 44 pages
Date of creation: 14 Jun 2000
Date of revision:
Note: Special thanks are due to Martin Hellwig for ongoing discussions and advice. I would also like to thank Jacques Crémer, Sascha Haller, Nobuhiro Kiyotaki, Christian Laux, Nicolas Melissas, Benny Moldovanu and John Moore as well as the participants of the Mannheim workshop in economic theory for very useful discussions and comments. Financial support of the Swiss Science National Foundation is greatfully acknowledged. All remaining errors are my own.
Contact details of provider:
Postal: D-68131 Mannheim
Phone: (49) (0) 621-292-2547
Fax: (49) (0) 621-292-5594
Web page: http://www.sfb504.uni-mannheim.de/
More information through EDIRC
Web page: http://www.sfb504.uni-mannheim.de
Other versions of this item:
- Dezso Szalay, 2000. "Optimal Delegation," Econometric Society World Congress 2000 Contributed Papers 0749, Econometric Society.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
- Roider, Andreas, 2004.
"Delegation of Authority as an Optimal (In)complete Contract,"
IZA Discussion Papers
1298, Institute for the Study of Labor (IZA).
- 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.
- Andreas Roider, 2003. "Delegation of Authority as an Optimal (In)complete Contract," Bonn Econ Discussion Papers bgse8_2003, University of Bonn, Germany, revised Aug 2004.
- Krähmer, Daniel, 2002. "Delegation versus authority," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-26, Social Science Research Center Berlin (WZB).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carsten Schmidt).
If references are entirely missing, you can add them using this form.