The failure of the delegation principle in a principal-agent relationship with transfers

Mehdi Ayouni (), Franck Bien and Thomas Lanzi ()
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Mehdi Ayouni: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Franck Bien: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Thomas Lanzi: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: In a principal-agent model with monetary transfers, we show that the delegation principle always fails even if preferences are perfectly aligned. This result holds if (I) the principal is committed to taking an action that is payoff-relevant for both parties if the agent rejects the proposed contract and (II) the principal can contractually extract surplus from the agent

Keywords: Information; Transfers; Contract; Delegation (search for similar items in EconPapers)
Date: 2023
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Published in Economics Bulletin, 2023, 43 (1), pp.518-525

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04569618

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