Optimal Sequential Delegation

Eugen Kovac and Daniel Krähmer

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: The paper extends the optimal delegation framework pioneered by Holmström (1977, 1984) to a dynamic environment where, at the outset, the agent privately knows his ability to interpret decision relevant private information received later on. We show that any mechanism can be implemented by a sequential menu of delegation sets where the agent first picks a delegation set and then chooses an action within this set. For the uniform{quadratic case, we characterize when sequential delegation is strictly better than static delegation and derive the optimal delegation menu. We provide sufficient conditions so that our results extend beyond the uniform distribution.

Keywords: optimal delegation; sequential screening; dynamic mechanism design; non-transferable utility (search for similar items in EconPapers)
JEL-codes: D02 D20 D82 D86 (search for similar items in EconPapers)
Date: 2013-04-11
New Economics Papers: this item is included in nep-cta, nep-mic and nep-upt
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Journal Article: Optimal sequential delegation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:427

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