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Delegation and discretion

Author

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  • Armstrong, Mark

Abstract

There are many situations in which a principal delegates decisions to a better-informed agent but does not choose to give full discretion. This paper discusses one reason why this might be desirable: the agent may have tastes that differ from those of the principal. Limiting the agent's discretion has the advantage that an untrustworthy agent is constrained from following policies that are disliked by the principal, but the disadvantage that trustworthy agents are then not permitted to carry out some desirable policies. It is shown that a greater risk of the agent being untrustworthy will lead to her being offered less discretion over policy. Applications of the model involve judicial sentencing policy, monetary policy, and pricing policy in a regulated industry.

Suggested Citation

  • Armstrong, Mark, 1995. "Delegation and discretion," MPRA Paper 17069, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17069
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    File URL: https://mpra.ub.uni-muenchen.de/17069/1/MPRA_paper_17069.pdf
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    Citations

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    Cited by:

    1. Aggey Semenov, 2012. "Delegation to a potentially uninformed agent," Working Papers 1215E, University of Ottawa, Department of Economics.
    2. 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.
    3. Mauring, Eeva, 2016. "A two-agent model of sequential search and choice," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 122-137.
    4. Noam Tanner, 2018. "Optimal Delegation Under Unknown Bias: The Role of Concavity," Supervisory Research and Analysis Working Papers RPA 18-1, Federal Reserve Bank of Boston.
    5. Gan, Tan & Hu, Ju & Weng, Xi, 2023. "Optimal contingent delegation," Journal of Economic Theory, Elsevier, vol. 208(C).
    6. Miriam Schütte & Philipp Christoph Wichardt, 2013. "Delegation and Interim Performance Evaluation," CESifo Working Paper Series 4193, CESifo.
    7. 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.
    8. Pinghan Liang, 2010. "Transfer of Authority within Hierarchy," Levine's Working Paper Archive 661465000000000139, David K. Levine.

    More about this item

    Keywords

    Principal-Agent Problem; Delegation; Discretion; Mandatory Sentences; Monetary Policy; Regulation.;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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