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Delegation of information verification

Doyoung Kim ()

International Journal of Industrial Organization, 2013, vol. 31, issue 5, 488-500

Abstract: An agent may manipulate information when transmitting it to the principal. A direct response to this problem is to verify the information. The paper explores a situation where the principal engages in information verification herself or alternatively delegates it to the agent. The paper finds that delegated verification can be optimal if the agent has to expend costly effort to acquire information before verifying it. Delegated verification promotes the agent's incentive for information acquisition. The paper also finds that delegated verification is more likely to be optimal if the agent is more biased.

Keywords: Costly state verification; Delegation; Information acquisition (search for similar items in EconPapers)
JEL-codes: D82 D86 L22 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1016/j.ijindorg.2013.08.003

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Handle: RePEc:eee:indorg:v:31:y:2013:i:5:p:488-500