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Decision Rules and Optimal Delegation of Information Acquisition

  • Giuliana Palumbo

    ()

    (European University Institute and CSEF, Università di Salerno)

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    The paper analyzes the relationship between decision rules and information acquisition in decision-making processes. The setting under consideration is one where information acquisition and decision making are assigned to different agents and the decision-maker's preferences are not observable. The paper argues that the choice of the optimal organizational structure at the information acquisition stage depends on the degree of discretion granted to the decision-maker. High discretion ensures more flexibility but requires that information acquisition is assigned to the parties directly involved in the decision. Since they have conflicting interests, the parties provide a check against abusive decisions although at the cost of information manipulation. Low discretion introduces rigidity but allows the delegation of information acquisition to an unbiased agent who ensures truthful reports. Which of these two "optimal combinations" is preferable is then shown to depend on the probability of finding information when an agent searches. Our analysis sheds light on the stylized fact that Civil Law systems are generally associated with inquisitorial procedures whereas Common Law systems are combined with adversarial procedures.

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    File URL: http://www.csef.it/WP/wp42.pdf
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    Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 42.

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    Date of creation: 01 May 2000
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    Handle: RePEc:sef:csefwp:42
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    1. Laffont, Jean-Jacques & Tirole, Jean, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1089-127, November.
    2. Palumbo, Giuliana, 2006. "Optimal duplication of effort in advocacy systems," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 112-128, May.
    3. Richard J. Gilbert and David M. Newbery., 1988. "Regulation Games," Economics Working Papers 8879, University of California at Berkeley.
    4. Hyun Song Shin, 1998. "Adversarial and Inquisitorial Procedures in Arbitration," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 378-405, Summer.
    5. Lipman Barton L. & Seppi Duane J., 1995. "Robust Inference in Communication Games with Partial Provability," Journal of Economic Theory, Elsevier, vol. 66(2), pages 370-405, August.
    6. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
    7. Laffont, Jean-Jacques & Tirole, Jean, 1990. "The Politics of Government Decision Making: Regulatory Institutions," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 1-31, Spring.
    8. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
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