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The Organization of Delegated Expertise

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  • Gromb, Denis
  • Martimort, David

Abstract

This Paper proposes a theory of the optimal organization of delegated expertise. For incentive purposes, a principal should reward an expert when their recommendation is confirmed either by the facts or by other experts’ recommendations. With a single expert, we show that the agency costs of delegated expertise exhibit diseconomies of scale. Possible organizational responses to this problem include basing decisions on a less than optimal amount of information, and relying on multiple experts. We analyse the source of gains from having multiple experts in different contracting environments corresponding to different nexi of collusion between the principal and/or the experts.

Suggested Citation

  • Gromb, Denis & Martimort, David, 2004. "The Organization of Delegated Expertise," CEPR Discussion Papers 4572, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4572
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    References listed on IDEAS

    as
    1. Fahad Khalil & Doyoung Kim & Dongsoo Shin, 2006. "Optimal Task Design: To Integrate or Separate Planning and Implementation?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 457-478, June.
    2. Laux, Christian, 2001. "Limited-Liability and Incentive Contracting with Multiple Projects," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 514-526, Autumn.
    3. Christian Laux, 2001. "Delegated Information Acquisition and Capital Budgeting: On the Separation of Project Evaluation and Project Management," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 591-591, December.
    4. repec:bla:joares:v:25:y:1987:i:1:p:68-89 is not listed on IDEAS
    5. Dilip Mookherjee, 1984. "Optimal Incentive Schemes with Many Agents," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 433-446.
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    Citations

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    Cited by:

    1. Casamatta, Catherine & Haritchabalet, Carole, 2007. "Experience, screening and syndication in venture capital investments," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 368-398, July.
    2. Eberhard Feess & Michael Schieble & Markus Walzl, 2011. "Why it Pays to Conceal: On the Optimal Timing of Acquiring Verifiable Information," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 100-123, February.
    3. Bourjade, Sylvain, 2002. "Diversification of Investor's Expertise in IPOs," MPRA Paper 7259, University Library of Munich, Germany, revised Dec 2007.
    4. Dezsö Szalay & Ramon Arean, 2005. "Communicating with a Team of Experts," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 05.12, Université de Lausanne, Faculté des HEC, DEEP.
    5. Salvatore Piccolo & Emanuele Tarantino, 2011. "Managerial Compensations and Information Sharing under Moral Hazard: Is Transparency Good?," CSEF Working Papers 294, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    6. Szalay, Dezsö, 2009. "Contracts with endogenous information," Games and Economic Behavior, Elsevier, vol. 65(2), pages 586-625, March.
    7. Virginie Baritaux & Magali Aubert & Etienne Montaigne & Hervé Remaud, 2006. "Matchmakers in wine marketing channels: The case of French wine brokers," Agribusiness, John Wiley & Sons, Ltd., vol. 22(3), pages 375-390.
    8. Martimort, David & Semenov, Aggey, 2008. "The informational effects of competition and collusion in legislative politics," Journal of Public Economics, Elsevier, vol. 92(7), pages 1541-1563, July.
    9. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.
    10. Gerardi, Dino & Maestri, Lucas, 2012. "A principal-agent model of sequential testing," Theoretical Economics, Econometric Society, vol. 7(3), September.
    11. Isabelle Brocas & Juan D. Carillo, 2005. "A Theory of Influence: The Strategic Value of Public Ignorance," IEPR Working Papers 05.9, Institute of Economic Policy Research (IEPR).
    12. Salvatore Piccolo, 2011. "Communicating Vertical Hierarchies: the Adverse Selection Case," CSEF Working Papers 273, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    13. Semenov, Aggey & Martimort, David, 2004. "Communication by Interest Groups and the Organization of Lobbying," MPRA Paper 8519, University Library of Munich, Germany.

    More about this item

    Keywords

    collusion; expertise; organization;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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