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Delegating Management to Experts

Author

Listed:
  • Chifeng Dai
  • Tracy R. Lewis

    (Duke University)

  • Giuseppe Lopomo

Abstract

Owners of property and assets frequently delegate decisions about operating and maintaining their property to managers who are better informed about local market conditions. We analyze how owners optimally contract with managers who vary in their expertise at prescribing service. We show that the most expert managers offer the greatest variation in operating recommendations. Owners benefit from dealing with experts provided they contract sequentially, whereby terms are negotiated gradually as the manager acquires information.

Suggested Citation

  • Chifeng Dai & Tracy R. Lewis & Giuseppe Lopomo, 2006. "Delegating Management to Experts," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 503-520, Autumn.
    • Handle: RePEc:rje:randje:v:37:y:2006:3:p:503-520
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    Citations

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    Cited by:

    1. Strausz, Roland & Krähmer, Daniel, 2011. "The Benefits of Sequential Screening," CEPR Discussion Papers 8629, C.E.P.R. Discussion Papers.
    2. Krähmer, Daniel & Kováč, Eugen, 2016. "Optimal sequential delegation," Journal of Economic Theory, Elsevier, vol. 163(C), pages 849-888.
    3. Raphael Boleslavsky & Maher Said, 2013. "Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 1-34.
    4. Szalay, Dezsö, 2009. "Contracts with endogenous information," Games and Economic Behavior, Elsevier, vol. 65(2), pages 586-625, March.
    5. Goodall, Amanda H. & Kahn, Lawrence M. & Oswald, Andrew J., 2011. "Why do leaders matter? A study of expert knowledge in a superstar setting," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 265-284, March.
    6. Conlin, Michael & Orsini, Joe & Tang, Meng-Chi, 2013. "The effect of an agent’s expertise on National Football League contract structure," Economics Letters, Elsevier, vol. 121(2), pages 275-281.
    7. Inderst, Roman & Peitz, Martin, 2012. "Informing consumers about their own preferences," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 417-428.

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