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The Allocation of Authority and Information Revelation

Author

Listed:
  • Dongryul Lee

    (Sungshin University)

Abstract

We study the allocation of authority and the possibility of information revelation in a principal-agent model where the principal faces both problems of adverse selection and moral hazard. We find that the consideration for information asymmetry and effort incentive for the agent makes the principal more likely delegate. Interestingly, we find that the informed agent has an ex-ante incentive to commit to reveal his information to the principal voluntarily if the information is hard.

Suggested Citation

  • Dongryul Lee, 2014. "The Allocation of Authority and Information Revelation," Korean Economic Review, Korean Economic Association, vol. 30, pages 5-23.
    • Handle: RePEc:kea:keappr:ker-20140630-30-1-01
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    References listed on IDEAS

    as
    1. 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.
    2. Jeremy C. Stein, 2002. "Information Production and Capital Allocation: Decentralized versus Hierarchical Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1891-1921, October.
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    More about this item

    Keywords

    Delegation; Information Revelation; Incentives; Contract;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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