Allocation of Decision-Making Authority with Principal's Reputation Concerns

Tsung-Sheng Tsai () and Yasunari Tamada

No 701, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: This paper analyzes the allocation of decision-making authority when the principal has reputation concerns. The principal can either keep the authority and consult the agent (an expert), or delegate the authority to the agent; however, the outside evaluator cannot observe the allocation of authority. Hence, delegation can provide a way to manipulate the principal's ex post reputation. In general, the principal keeps the authority too often when she has the opportunity of delegation. When the evaluator believes that the agent may make the decision sometimes, the principal has less incentive to make the right decisions

Keywords: Delegation; Principal's Reputation Concerns; Cheap Talk (search for similar items in EconPapers)
JEL-codes: D23 D82 L14 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:701

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