Optimal delegation

Ricardo Alonso and Niko Matouschek

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We analyse the design of decision rules by a principal who faces an informed but biased agent and who is unable to commit to contingent transfers. The contracting problem reduces to a delegation problem in which the principal commits to a set of decisions from which the agent chooses his preferred one. We characterize the optimal delegation set and perform comparative statics on the principal's willingness to delegate and the agent's discretion. We also provide conditions for interval delegation to be optimal and show that they are satisfied when the agent's preferences are sufficiently aligned. Finally, we apply our results to the regulation of a privately informed monopolist and to the design of legislatives rules.

JEL-codes: D82 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Published in Review of Economic Studies, 2008, 75(1), pp. 259-293. ISSN: 0034-6527

Downloads: (external link)
http://eprints.lse.ac.uk/58665/ Open access version. (application/pdf)

Related works:
Journal Article: Optimal Delegation (2008)
Working Paper: Optimal Delegation (2005)
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:ehl:lserod:58665

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager (lseresearchonline@lse.ac.uk).