Benefiting from Bias: Delegating to Encourage Information Acquisition

Ian Ball and Xin Gao

Papers from arXiv.org

Abstract: A principal delegates decisions to a biased agent. Payoffs depend on a state that the principal cannot observe. Initially, the agent does not observe the state, but he can acquire information about it at a cost. We characterize the principal's optimal delegation set. This set features a cap on high decisions and a gap around the agent's ex ante favorite decision. It may even induce ex-post Pareto-dominated decisions. Under certain conditions on the cost of information acquisition, we show that the principal prefers delegating to an agent with a small bias than to an unbiased agent.

Date: 2023-11
New Economics Papers: this item is included in nep-mic and nep-reg
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2311.11526 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2311.11526

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().