A Model of Delegated Project Choice With Application to Merger Policy

Mark Armstrong () and John Vickers ()

No 347, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We present a model in which a principal delegates the choice of project to an agent with different preferences. A project`s characteristics are verifiable once presented to the principal, but the principal does not know how many projects are available to the agent. The principal chooses the set of projects which the agent can implement. Three frameworks are considered: (i) a static setting in which the set of available projects is exogenous to the agent but uncertain; (ii) a dynamic setting in which by expending effort the agent can affect the number of projects, and (iii) a dynamic setting in which the agent must wait for projects to materialize. The model is applied to the choice of welfare standard for merger policy.

Keywords: Delegation; Principal-Agent; Search; Merger Policy (search for similar items in EconPapers)
JEL-codes: D82 D83 L4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-ppm
Date: 2007
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Persistent link: http://EconPapers.repec.org/RePEc:oxf:wpaper:347

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