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Delegation versus authority
[Delegation versus Autorität]

Author

Listed:
  • Krähmer, Daniel

Abstract

The paper studies the role of delegation and authority within a principal-agent relation in which a non-contractible action has to be taken. The agent has private information relevant for the principal, but has policy preferences different from the principal. Consequently, an information revelation problem arises. We contribute to the literature by assuming transferable utility and contractibility of messages and decision rights. While delegation leads to loss of control, it facilitates the agent’s participation and leads to an informed decision. Moreover, message-contingent delegation creates incentives for information revelation. We derive the optimal contract for the principal and investigate when delegation outperforms authority.

Suggested Citation

  • Krähmer, Daniel, 2002. "Delegation versus authority
    [Delegation versus Autorität]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-26, Social Science Research Center Berlin (WZB).
  • Handle: RePEc:zbw:wzbmpg:fsiv0226
    as

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    File URL: https://www.econstor.eu/bitstream/10419/51128/1/36308634X.pdf
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    References listed on IDEAS

    as
    1. Dezso Szalay, 2000. "Optimal Delegation," Econometric Society World Congress 2000 Contributed Papers 0749, Econometric Society.
    2. Roland Benabou & Jean Tirole, 1999. "Self-Confidence And Social Interactions," Working Papers 151, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.
    3. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
    4. Helmut Bester & Roland Strausz, "undated". "Imperfect Commitment and the Revelation Principle," Papers 004, Departmental Working Papers.
    5. Kay Mitusch & Roland Strausz, "undated". "Mediators and Mechanism Design: Why Firms Hire Consultants," Papers 005, Departmental Working Papers.
    6. Kay Mitusch & Roland Strausz, 2000. "Mediation in Situations of Conflict," Econometric Society World Congress 2000 Contributed Papers 0361, Econometric Society.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Stefan Ambec, 2003. "A Theory of Authority in Bilateral Contracting," CSEF Working Papers 102, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

    More about this item

    Keywords

    Delegation; Partial Contracting; Mechanism Design; Imperfect Commitment; Transferable Utility;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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