Optimally Biased Expertise

Pavel Ilinov (), Andrei Matveenko, Maxim Senkov and Egor Starkov

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Keywords: delegation; rational inattention; heterogeneous beliefs; discrete choice (search for similar items in EconPapers)
JEL-codes: D82 D83 D91 M51 (search for similar items in EconPapers)
Pages: 43
Date: 2022-11
New Economics Papers: this item is included in nep-mic
Note: This paper shows that the principal can strictly benefit from delegating a decision to an agent whose opinion differs from that of the principal. We consider a “delegated expertise” problem, in which the agent has an advantage in information acquisition relative to the principal, as opposed to having preexisting private information. When the principal is ex ante predisposed towards some action, it is optimal for her to hire an agent who is predisposedbtowards the same action, but to a smaller extent, since such an agent would acquire more information, which outweighs the bias stemming from misalignment. We show that belief misalignment between an agent and a principal is a viable instrument in delegation, performing on par with contracting and communication in a class of problems.
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Working Paper: Optimally Biased Expertise (2022)
Working Paper: Optimally Biased Expertise (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2022_370

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