Optimal Delegation with Multi-dimensional Decisions

Frederic Koessler and David Martimort

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: This paper investigates optimal mechanisms in a principal-agent framework with a two-dimensional decision space, quadratic payoffs and no monetary transfers. If the conflicts of interest between the principal and the agent are different on each dimension, then delegation is always strictly valuable. The principal can better extract information from the agent by using the spread between the two decisions as a costly screening device. Delegation sets no longer trade off pooling intervals and intervals of full discretion but instead take more complex shapes. We use advanced results from the calculus of variations to ensure existence of a solution and derive sufficient and necessary conditions for optimality. The optimal mechanism is continuous and deterministic. The agent's informational rent, the average decision and its spread are strictly monotonic in the agent's type. The comparison of the optimal mechanism with standard one-dimensional mechanisms shows how cooperation between different principals controlling various dimensions of the agent's activities facilitates information revelation.

Keywords: Mechanism; Delegation; Mechanism design; Multi-dimensional decision (search for similar items in EconPapers)
Date: 2012-09
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Published in Journal of Economic Theory, 2012, 147 (5), pp.1850-1881. ⟨10.1016/j.jet.2012.05.019⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Optimal delegation with multi-dimensional decisions (2012)
Working Paper: Optimal Delegation with Multi-dimensional Decisions (2012)
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:hal:pseptp:halshs-00754576

DOI: 10.1016/j.jet.2012.05.019

Access Statistics for this paper

More papers in PSE-Ecole d'économie de Paris (Postprint) from HAL
Bibliographic data for series maintained by Caroline Bauer ().