Message-contingent delegation Krahmer, Daniel

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Krahmer, Daniel
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Journal of Economic Behavior & Organization
Agency (Law) -- Forecasts and trends; Economics; Delegation of authority -- Influence
To link to full-text access for this article, visit this link: Byline: Daniel Krahmer Keywords: Delegation; Mechanism design; Imperfect commitment; Transferable utility 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. Author Affiliation: Freie Universitat Berlin, Institut fur Wirtschaftstheorie, Boltzmannstr. 20, 14195 Berlin, Germany Article History: Received 27 May 2002; Accepted 5 January 2004
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