Relational delegation

Ricardo Alonso and Niko Matouschek

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

Abstract: We analyze a cheap talk game with partial commitment by the principal. We first treat the principal's commitment power as exogenous and then endogenize it in an infinitely repeated game. We characterize optimal decision making for any commitment power and show when it takes the form of threshold delegation—in which case the agent can make any decision below a threshold—and centralization—in which case the agent has no discretion. For small biases, threshold delegation is optimal for any smooth distribution. Outsourcing can only be optimal if the principal's commitment power is sufficiently small.

JEL-codes: J50 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (29)

Published in RAND Journal of Economics, 2007, 38(4), pp. 1070-1089. ISSN: 0741-6261

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Related works:
Journal Article: Relational delegation (2007)
Working Paper: Relational Delegation (2005)
Working Paper: Relational Delegation (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:58668

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