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Delegation to a possibly ignorant agent

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  • Aggey Semenov

Abstract

In a delegation problem, an uninformed principal delegates decision‐making powers to a biased and possibly ignorant agent. The principal cannot use monetary payments but can restrict the set of the agent's choices. I show that in the general case, the principal may offer a disconnected set of choices. In a setting with arbitrary bias the uncertainty principle holds—the principal benefits as the likelihood that the agent is informed increases. When the bias is constant, I show that the ally principle holds—the principal benefits as the bias becomes smaller. Finally, when the likelihood of the agent being informed is determined by the agent's effort, then for small biases the principal benefits from limiting the agent's choice. When the agent is sufficiently biased, the principal gives more choice to the agent, so as to to improve incentives for information acquisition. Délégation à un agent possiblement ignorant. Dans un problème de délégation, un principal non‐informé délègue le pouvoir de décision à un agent partial et possiblement ignorant. Le principal ne peut utiliser des paiements monétaires mais peut restreindre l’ensemble des choix de l’agent. On montre que, dans le cas général, le principal peut offrir un ensemble de choix déconnectés. Dans une situation où la partialité est arbitraire, le principe d’incertitude joue. Quand la partialité est constante, on montre que le principe d’alliance joue – le principal bénéficiant à proportion que la probabilité que l’agent soit informé s’accroît. Enfin quand la vraisemblance que l’agent soit informé dépend de l’effort de l’agent, alors, pour les cas de partialité faible, le principal bénéficie d’une limitation des choix de l’agent. Quand l’agent est suffisamment partial, le principal donne plus de choix à l’agent, de manière à améliorer les incitations à acquérir de l’information.

Suggested Citation

  • Aggey Semenov, 2018. "Delegation to a possibly ignorant agent," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(1), pages 64-93, February.
  • Handle: RePEc:wly:canjec:v:51:y:2018:i:1:p:64-93
    DOI: 10.1111/caje.12316
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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