A model of delegated project choice

Mark Armstrong () and John Vickers ()

MPRA Paper from University Library of Munich, Germany

Abstract: We present a model in which a principal delegates the choice of project to an agent with different preferences. The principal determines the set of projects from which the agent may choose. The principal can verify the characteristics of the project chosen by the agent, but does not know which other projects were available to the agent. We consider situations where the collection of available projects is exogenous to the agent but uncertain, where the principal cannot observe the agent's payoff, where the principal can pay the agent to choose a desirable project, and where the agent must invest effort to discover a project.

Keywords: Delegation; principal-agent; rules; merger policy; hurdle rates (search for similar items in EconPapers)
JEL-codes: D86 D83 L4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta and nep-ppm
Date: 2009-03-18
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http://mpra.ub.uni-muenchen.de/8963/ orginal version
http://mpra.ub.uni-muenchen.de/14161/ revised version

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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:8963

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