Delegation versus authority
[Delegation versus Autorität]
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.
|Date of creation:||2002|
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- Roland Babou & Jean Tirole, 1999.
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151, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
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- R. Benabou & J. Tirole, 1999. "Self-Confidence and Social Interactions," Princeton Economic Theory Papers 00s2, Economics Department, Princeton University.
- Roland Benabou & Jean Tirole, 2000. "Self-Confidence and Social Interactions," NBER Working Papers 7585, National Bureau of Economic Research, Inc.
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- Dezso Szalay, 2000.
Econometric Society World Congress 2000 Contributed Papers
0749, Econometric Society.
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