Optimal delegation via a strategic intermediary
This paper studies the optimal design of delegation rule in a three-tier principal-intermediary-agent hierarchy. In this hierarchy, monetary transfer is not feasible, delegation is made sequentially, and all players are strategic. We characterize the optimal delegation mechanism. It is shown that the single-interval delegation a la Holmstrom is optimal only when the intermediary is moderately biased. Otherwise, as responses to the distortion caused by a biased intermediary, the optimal delegation set may involve a hole. Thus, multi-interval delegation set would arise when subordinates have opposing biases. This result sheds some light on policy threshold effects: "slight" changes in the underlying state cause a jump in the policy responses.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kovác, Eugen & Mylovanov, Tymofiy, 2009. "Stochastic mechanisms in settings without monetary transfers: The regular case," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1373-1395, July.
- Guido Friebel & Michael Raith, 2004. "Abuse of Authority and Hierarchical Communication," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 224-244, Summer.
- Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
- Ricardo Alonso & Niko Matouschek, 2007. "Relational delegation," LSE Research Online Documents on Economics 58668, London School of Economics and Political Science, LSE Library.
- Ricardo Alonso & Niko Matouschek, 2008. "Optimal delegation," LSE Research Online Documents on Economics 58665, London School of Economics and Political Science, LSE Library.
- Wouter Dessein, 2000.
"Authority and Communication in Organizations,"
Econometric Society World Congress 2000 Contributed Papers
1747, Econometric Society.
- Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
- Dessein, Wouter, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 811-38, October.
- Nahum D. Melumad & Toshiyuki Shibano, 1991. "Communication in Settings with No. Transfers," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 173-198, Summer.
- Ricardo Alonso & Niko Matouschek, 2008.
Review of Economic Studies,
Oxford University Press, vol. 75(1), pages 259-293.
- Alonso, Ricardo & Matouschek, Niko, 2005.
IZA Discussion Papers
1454, Institute for the Study of Labor (IZA).
- Kolotilin, Anton & Li, Hao & Li, Wei, 2013. "Optimal limited authority for principal," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2344-2382.
- John Geanakoplos & Paul R. Milgrom, 1988.
"A Theory of Hierarchies Based on Limited Managerial Attention,"
Cowles Foundation Discussion Papers
775R, Cowles Foundation for Research in Economics, Yale University.
- Geanakoplos, John & Milgrom, Paul, 1991. "A theory of hierarchies based on limited managerial attention," Journal of the Japanese and International Economies, Elsevier, vol. 5(3), pages 205-225, September.
- Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
- Maria Goltsman & Gregory Pavlov, 2008.
"How to Talk to Multiple Audiences,"
UWO Department of Economics Working Papers
20081, University of Western Ontario, Department of Economics.
- McAfee, R. Preston & McMillan, John., 1990.
"Organizational Diseconomies of Scale,"
728, California Institute of Technology, Division of the Humanities and Social Sciences.
- Krishna, V. & Morgan, J., 1999.
"A Model of Expertise,"
206, Princeton, Woodrow Wilson School - Public and International Affairs.
- Mylovanov, Tymofiy, 2008. "Veto-based delegation," Journal of Economic Theory, Elsevier, vol. 138(1), pages 297-307, January.
- Dezs� Szalay, 2005.
"The Economics of Clear Advice and Extreme Options,"
Review of Economic Studies,
Oxford University Press, vol. 72(4), pages 1173-1198.
- Dezsö SZALAY, 2003. "The Economics of Clear Advice and Extreme Options," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 03.09, Université de Lausanne, Faculté des HEC, DEEP.
- Dezsoe Szalay, 2004. "The Economics of Clear Advice and Extreme Options," Econometric Society 2004 North American Winter Meetings 233, Econometric Society.
- Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
- Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro & Takagi, Yuki, 2013. "Legislative committees as information intermediaries: A unified theory of committee selection and amendment rules," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 103-115.
- Ivanov, Maxim, 2010. "Communication via a strategic mediator," Journal of Economic Theory, Elsevier, vol. 145(2), pages 869-884, March.
- Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
- Canice Prendergast, 2002. "Consumers and Agency Problems," Economic Journal, Royal Economic Society, vol. 112(478), pages C34-C51, March.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:45271. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.