Message-contingent delegation |
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Authors: | Daniel Krhmer |
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Institution: | aFreie Universität Berlin, Institut für Wirtschaftstheorie, Boltzmannstr. 20, 14195 Berlin, Germany |
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Abstract: | The paper studies the role of delegation and authority in 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. I consider a partially incomplete contracting environment with contractibility of messages and decision rights and with transferable utility. I contribute to the literature by allowing for message-contingent delegation and by deriving the optimal partially incomplete contract. It is shown that message-contingent delegation creates incentives for information revelation and may outperform unconditional authority and unconditional delegation. |
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Keywords: | Delegation Mechanism design Imperfect commitment Transferable utility |
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