Delegation and discretion

Mark Armstrong

MPRA Paper from University Library of Munich, Germany

Abstract: There are many situations in which a principal delegates decisions to a better-informed agent but does not choose to give full discretion. This paper discusses one reason why this might be desirable: the agent may have tastes that differ from those of the principal. Limiting the agent's discretion has the advantage that an untrustworthy agent is constrained from following policies that are disliked by the principal, but the disadvantage that trustworthy agents are then not permitted to carry out some desirable policies. It is shown that a greater risk of the agent being untrustworthy will lead to her being offered less discretion over policy. Applications of the model involve judicial sentencing policy, monetary policy, and pricing policy in a regulated industry.

Keywords: Principal-Agent Problem; Delegation; Discretion; Mandatory Sentences; Monetary Policy; Regulation. (search for similar items in EconPapers)
JEL-codes: D23 D73 D82 (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (9)

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