Optimally Biased Expertise

Pavel Ilinov, Andrei Matveenko, Maxim Senkov and Egor Starkov

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: 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 predisposed towards 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.

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)
Date: 2022-09
New Economics Papers: this item is included in nep-cta and nep-mic
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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:cer:papers:wp736

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