Optimal Delegation in a Multidimensional World

Andreas Kleiner

Papers from arXiv.org

Abstract: We study a model of delegation in which a principal takes a multidimensional action and an agent has private information about a multidimensional state. We provide necessary and sufficient conditions for an arbitrary mechanism to maximize the principal's expected payoff. A key step shows that a function is the indirect utility of an incentive-compatible mechanism if and only if it is convex and lies below the agent's full-discretion payoff. We apply our optimality conditions to convex delegation sets and characterize when a single budget optimally links decisions. Linking can preserve discretion even when separate delegation would eliminate it. Optimal linking can also require a nonconvex delegation set, even with uniformly distributed types. If the principal cares little about aligned decisions, every optimal mechanism randomizes: risk in an aligned decision provides incentives in the biased ones at little cost to her.

Date: 2022-08, Revised 2026-09
New Economics Papers: this item is included in nep-cta, nep-des, nep-mic and nep-upt
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Citations: View citations in EconPapers (2)

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