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A Model of Delegated Project Choice With Application to Merger Policy


  • John Vickers
  • Mark Armstrong


We present a model in which a principal delegates the choice of project to an agent with different preferences. A project`s characteristics are verifiable once presented to the principal, but the principal does not know how many projects are available to the agent. The principal chooses the set of projects which the agent can implement. Three frameworks are considered: (i) a static setting in which the set of available projects is exogenous to the agent but uncertain; (ii) a dynamic setting in which by expending effort the agent can affect the number of projects, and (iii) a dynamic setting in which the agent must wait for projects to materialize. The model is applied to the choice of welfare standard for merger policy.

Suggested Citation

  • John Vickers & Mark Armstrong, 2007. "A Model of Delegated Project Choice With Application to Merger Policy," Economics Series Working Papers 347, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:347

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    References listed on IDEAS

    1. Ricardo Alonso & Niko Matouschek, 2008. "Optimal Delegation," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 259-293.
    2. 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.
    3. Armstrong, M., 1994. "Delegation and discretion," Discussion Paper Series In Economics And Econometrics 9421, Economics Division, School of Social Sciences, University of Southampton.
    4. Fridolfsson, Sven-Olof, 2007. "A Consumer Surplus Defense in Merger Control," Working Paper Series 686, Research Institute of Industrial Economics.
    5. Joseph Farrell & Michael Katz, 2006. "The Economics of Welfare Standards in Antitrust," CPI Journal, Competition Policy International, vol. 2.
    6. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
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    Cited by:

    1. Weese, Eric, 2008. "Political Mergers as Coalition Formation : Evidence from Japanese Municipal Amalgamations," CCES Discussion Paper Series 5, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.

    More about this item


    Delegation; Principal-Agent; Search; Merger Policy;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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