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: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://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.:
- Ivanov, Maxim, 2010. "Communication via a strategic mediator," Journal of Economic Theory, Elsevier, vol. 145(2), pages 869-884, March.
- Mylovanov, Tymofiy, 2008.
Journal of Economic Theory,
Elsevier, vol. 138(1), pages 297-307, January.
- Mylovanov, Tymofiy, 2005. "Veto-Based Delegation," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 129, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Ricardo Alonso & Niko Matouschek, 2007.
RAND Journal of Economics,
RAND Corporation, vol. 38(4), pages 1070-1089, December.
- 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.
- Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
- Vijay Krishna & John Morgan, 1999.
"A Model of Expertise,"
Game Theory and Information
- Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.
- Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
- Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro, 2013. "Hierarchical cheap talk," Theoretical Economics, Econometric Society, vol. 8(1), January.
- 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.
- Dezsoe Szalay, 2004.
"The Economics of Clear Advice and Extreme Options,"
Econometric Society 2004 North American Winter Meetings
233, Econometric Society.
- 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.
- 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.
- 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.
- Goltsman, Maria & Pavlov, Gregory, 2011.
"How to talk to multiple audiences,"
Games and Economic Behavior,
Elsevier, vol. 72(1), pages 100-122, May.
- Ricardo Alonso & Niko Matouschek, 2008.
Review of Economic Studies,
Oxford University Press, vol. 75(1), pages 259-293.
- 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.
- Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
- Goltsman, Maria & Hörner, Johannes & Pavlov, Gregory & Squintani, Francesco, 2009. "Mediation, arbitration and negotiation," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1397-1420, July.
- Kolotilin, Anton & Li, Hao & Li, Wei, 2013. "Optimal limited authority for principal," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2344-2382.
- Crawford, Vincent P & Sobel, Joel, 1982.
"Strategic Information Transmission,"
Econometric Society, vol. 50(6), pages 1431-51, November.
- Mark Armstrong & John Vickers, 2010.
"A Model of Delegated Project Choice,"
Econometric Society, vol. 78(1), pages 213-244, 01.
- Canice Prendergast, 2002. "Consumers and Agency Problems," Economic Journal, Royal Economic Society, vol. 112(478), pages C34-C51, March.
- McAfee, R. Preston & McMillan, John., 1990.
"Organizational Diseconomies of Scale,"
728, California Institute of Technology, Division of the Humanities and Social Sciences.
- 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.
- 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.
- Martimort, David & Semenov, Aggey, 2006. "Continuity in mechanism design without transfers," Economics Letters, Elsevier, vol. 93(2), pages 182-189, November.
- Ricardo Alonso & Niko Matouschek, 2007. "Relational delegation," LSE Research Online Documents on Economics 58668, London School of Economics and Political Science, LSE Library.
- Wouter Dessein, 2002.
"Authority and Communication in Organizations,"
Review of Economic Studies,
Oxford University Press, vol. 69(4), pages 811-838.
- Wouter Dessein, 2000. "Authority and Communication in Organizations," Econometric Society World Congress 2000 Contributed Papers 1747, Econometric Society.
- Ricardo Alonso & Niko Matouschek, 2008. "Optimal delegation," LSE Research Online Documents on Economics 58665, London School of Economics and Political Science, LSE Library.
- 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.
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: (Joachim Winter)
If references are entirely missing, you can add them using this form.