Optimal limited authority for principal
This article studies a principal-agent problem where the only commitment for the uninformed principal is to restrict the set of decisions she makes following a report by the informed agent. We show that an ex ante optimal equilibrium for the principal corresponds to a finite partition of the state space, and each retained decision is ex post suboptimal for the principal, biased toward the agentʼs preference. Generally an optimal equilibrium does not maximize the number of decisions the principal can credibly retain. Compared to no commitment, limited authority improves the quality of communication from the agent. As a result, it can give the principal a higher expected payoff than delegating the decision to the agent.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Ivanov, Maxim, 2010. "Communication via a strategic mediator," Journal of Economic Theory, Elsevier, vol. 145(2), pages 869-884, March.
- Kovác, Eugen & Mylovanov, Tymofiy, 2009. "Stochastic mechanisms in settings without monetary transfers: The regular case," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1373-1395, July.
- Vijay Krishna & John Morgan, 2005.
"Contracting for Information under Imperfect Commitment,"
- Vijay Krishna & John Morgan, 2008. "Contracting for information under imperfect commitment," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 905-925.
- Krishna, Vijay & Morgan, John, 2004. "Contracting for Information under Imperfect Commitment," Competition Policy Center, Working Paper Series qt4010c6w9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Ricardo Alonso & Niko Matouschek, 2007.
RAND Journal of Economics,
RAND Corporation, vol. 38(4), pages 1070-1089, December.
- Hardman Moore, John & Hart, Oliver, 1985.
"Incomplete Contracts and Renegotiation,"
CEPR Discussion Papers
60, C.E.P.R. Discussion Papers.
- Hermalin, Benjamin E. & Katz, Avery W. & Craswell, Richard, 2007. "Contract Law," Handbook of Law and Economics, Elsevier.
- V. Crawford & J. Sobel, 2010.
"Strategic Information Transmission,"
Levine's Working Paper Archive
544, David K. Levine.
- Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization? Corrigendum," American Economic Review, American Economic Association, vol. 98(3), pages 1195-96, June.
- Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
- 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.
- Goltsman, Maria & Hörner, Johannes & Pavlov, Gregory & Squintani, Francesco, 2009. "Mediation, arbitration and negotiation," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1397-1420, July.
- Wouter Dessein, 2000.
"Authority and Communication in Organizations,"
Econometric Society World Congress 2000 Contributed Papers
1747, Econometric Society.
- Dezsö SZALAY, 2003.
"The Economics of Clear Advice and Extreme Options,"
Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP)
03.09, Université de Lausanne, Faculté des HEC, DEEP.
- Dezsoe Szalay, 2004. "The Economics of Clear Advice and Extreme Options," Econometric Society 2004 North American Winter Meetings 233, Econometric Society.
- Andreas Blume & Oliver Board & Kohei Kawamura, 2007.
ESE Discussion Papers
167, Edinburgh School of Economics, University of Edinburgh.
- Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro, 2013. "Hierarchical cheap talk," Theoretical Economics, Econometric Society, vol. 8(1), January.
- Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, vol. 76(1), pages 117-136, 01.
- Wei Li, 2010. "Peddling Influence through Intermediaries," American Economic Review, American Economic Association, vol. 100(3), pages 1136-62, June.
- Nahum D. Melumad & Toshiyuki Shibano, 1991. "Communication in Settings with No. Transfers," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 173-198, Summer.
- Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008.
"When Does Coordination Require Centralization?,"
American Economic Review,
American Economic Association, vol. 98(1), pages 145-79, March.
- In-Koo Cho & David M. Kreps, 1997.
"Signaling Games and Stable Equilibria,"
Levine's Working Paper Archive
896, David K. Levine.
- David Austen-Smith & Jeffrey S. Banks, 1998.
"Cheap Talk and Burned Money,"
1245, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Mylovanov, Tymofiy, 2005.
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
129, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Navin Kartik, 2009.
"Strategic Communication with Lying Costs,"
Review of Economic Studies,
Oxford University Press, vol. 76(4), pages 1359-1395.
- Alonso, Ricardo & Matouschek, Niko, 2005.
CEPR Discussion Papers
5289, C.E.P.R. Discussion Papers.
- Ivanov, Maxim, 2010. "Informational control and organizational design," Journal of Economic Theory, Elsevier, vol. 145(2), pages 721-751, March.
When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:148:y:2013:i:6:p:2344-2382. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.