IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v137y2017icp54-71.html
   My bibliography  Save this article

Optimal delegation with self-interested agents and information acquisition

Author

Listed:
  • Omiya, Shungo
  • Tamada, Yasunari
  • Tsai, Tsung-Sheng

Abstract

A team composed of a principal and an agent needs to choose a project to run, while they may have different preferences regarding the project. The agent has various types of bias in terms of project selection, and he can make an effort in acquiring the information regarding the promise of projects. The principal can either keep the decision-making authority of choosing which project to run, or delegate it to the agent. We find that the optimal effort level under the principal's authority is at its highest when the agent is the most biased, while under the agent's authority it is also at its highest when the agent has an intermediate bias. Therefore, the principal should keep the authority and communicate with the agent when the agent is relatively biased, and delegate the authority when the agent has an intermediate bias. However, from the team's point of view where both players’ payoffs are taken into account, the principal may delegate too much authority to a relatively unbiased agent, and too little authority to a relatively biased agent.

Suggested Citation

  • Omiya, Shungo & Tamada, Yasunari & Tsai, Tsung-Sheng, 2017. "Optimal delegation with self-interested agents and information acquisition," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 54-71.
    • Handle: RePEc:eee:jeborg:v:137:y:2017:i:c:p:54-71
    DOI: 10.1016/j.jebo.2017.03.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268117300628
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2017.03.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yeon-Koo Che & Navin Kartik, 2009. "Opinions as Incentives," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 815-860, October.
    2. Dino Gerardi & Leeat Yariv, 2008. "Costly Expertise," American Economic Review, American Economic Association, vol. 98(2), pages 187-193, May.
    3. Philippe Aghion & John Van Reenen & Luigi Zingales, 2013. "Innovation and Institutional Ownership," American Economic Review, American Economic Association, vol. 103(1), pages 277-304, February.
    4. repec:ner:ucllon:http://discovery.ucl.ac.uk/17678/ is not listed on IDEAS
    5. Lewis, Tracy R & Sappington, David E M, 1997. "Information Management in Incentive Problems," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 796-821, August.
    6. Armstrong, M., 1994. "Delegation and discretion," Discussion Paper Series In Economics And Econometrics 9421, Economics Division, School of Social Sciences, University of Southampton.
    7. Helmut Bester & Daniel Krähmer, 2008. "Delegation and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 664-682, September.
    8. Hori, Kazumi, 2008. "The role of private benefits in information acquisition," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 626-631, December.
    9. Wouter Dessein, 2002. "Authority and Communication in Organizations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 811-838.
    10. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    11. Navin Kartik & Frances Xu Lee & Wing Suen, 2017. "Investment in concealable information by biased experts," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 24-43, March.
    12. Augustin Landier & David Sraer & David Thesmar, 2009. "Optimal Dissent in Organizations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(2), pages 761-794.
    13. Dezsö Szalay, 2005. "The Economics of Clear Advice and Extreme Options," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 1173-1198.
    14. Hao Li, 2001. "A Theory of Conservatism," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 617-636, June.
    15. Robert Dur & Otto H. Swank, 2005. "Producing and Manipulating Information," Economic Journal, Royal Economic Society, vol. 115(500), pages 185-199, January.
    16. David Thesmar, 2009. "Optimal dissent and risk Management within organizations," Post-Print hal-00495931, HAL.
    17. Eric Van den Steen, 2010. "Disagreement and the Allocation of Control," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 26(2), pages 385-426.
    18. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    19. Boleslavsky, Raphael & Lewis, Tracy R., 2016. "Evolving influence: Mitigating extreme conflicts of interest in advisory relationships," Games and Economic Behavior, Elsevier, vol. 98(C), pages 110-134.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ekinci, Emre & Theodoropoulos, Nikolaos, 2021. "Disagreement and informal delegation in organizations," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    2. Hausfeld, Jan & Fischbacher, Urs & Knoch, Daria, 2020. "The value of decision-making power in social decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 898-912.
    3. Hideshi Itoh & Kimiyuki Morita, 2023. "Information Acquisition, Decision Making, and Implementation in Organizations," Management Science, INFORMS, vol. 69(1), pages 446-463, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hideshi Itoh & Kimiyuki Morita, 2023. "Information Acquisition, Decision Making, and Implementation in Organizations," Management Science, INFORMS, vol. 69(1), pages 446-463, January.
    2. Ralph Boleslavsky & Tracy R. Lewis, 2011. "Advocacy and Dynamic Delegation," Working Papers 2011-7, University of Miami, Department of Economics.
    3. Boleslavsky, Raphael & Lewis, Tracy R., 2016. "Evolving influence: Mitigating extreme conflicts of interest in advisory relationships," Games and Economic Behavior, Elsevier, vol. 98(C), pages 110-134.
    4. Shuo Liu & Dimitri Migrow, 2019. "Designing organizations in volatile markets," ECON - Working Papers 319, Department of Economics - University of Zurich.
    5. Evans, R., Reiche, S. & Reiche, S., 2022. "When is a Contrarian Adviser Optimal?," Cambridge Working Papers in Economics 2222, Faculty of Economics, University of Cambridge.
    6. Li Hao & Wing Suen, 2009. "Viewpoint: Decision-making in committees," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 359-392, May.
    7. Ekinci, Emre & Theodoropoulos, Nikolaos, 2021. "Disagreement and informal delegation in organizations," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    8. Helmut Bester & Daniel Krähmer, 2008. "Delegation and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 664-682, September.
    9. Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro & Takagi, Yuki, 2013. "Legislative committees as information intermediaries: A unified theory of committee selection and amendment rules," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 103-115.
    10. Murali Agastya & Parimal Kanti Bag & Indranil Chakraborty, 2014. "Communication and authority with a partially informed expert," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 176-197, March.
    11. Omar A. Nayeem, 2017. "Bend Them but Don't Break Them: Passionate Workers, Skeptical Managers, and Decision Making in Organizations," American Economic Journal: Microeconomics, American Economic Association, vol. 9(3), pages 100-125, August.
    12. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    13. Suzanne Bijkerk & Josse (J.) Delfgaauw & Vladimir (V.A.) Karamychev & Otto (O.H.) Swank, 2018. "Need to Know? On Information Systems in Firms," Tinbergen Institute Discussion Papers 18-091/VII, Tinbergen Institute.
    14. Saori CHIBA & Kaiwen LEONG, 2018. "Information Aggregation and Countervailing Biases in Organizations," Discussion papers e-18-007, Graduate School of Economics , Kyoto University.
    15. Liu, Shuo & Migrow, Dimitri, 2022. "When does centralization undermine adaptation?," Journal of Economic Theory, Elsevier, vol. 205(C).
    16. Tim Baldenius & Xiaojing Meng & Lin Qiu, 2021. "The value of board commitment," Review of Accounting Studies, Springer, vol. 26(4), pages 1587-1622, December.
    17. Flavia Roldán, 2013. "The organization of expertise in the presence of communication," Review of Economic Design, Springer;Society for Economic Design, vol. 17(1), pages 63-81, March.
    18. Ricardo Alonso & Niko Matouschek, 2008. "Optimal Delegation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(1), pages 259-293.
    19. Szalay, Dezső & Deimen, Inga, 2015. "Information, authority, and smooth communication in organizations," CEPR Discussion Papers 10969, C.E.P.R. Discussion Papers.
    20. Ricardo Alonso & Odilon Câmara, 2024. "Organizing Data Analytics," Management Science, INFORMS, vol. 70(5), pages 3123-3143, May.

    More about this item

    Keywords

    Optimal delegation; Agent's bias; Information acquisition;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:137:y:2017:i:c:p:54-71. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.