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

Mehdi Ayouni, Franck Bien and Thomas Lanzi

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

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) an action that is payoff-relevant for both the principal and the agent has to be taken even if the agent rejects the proposed contract and (ii) the principal can contractually extract surplus from the agent.

Keywords: Contract; Delegation; Information; Transfers. (search for similar items in EconPapers)
JEL-codes: D23 D82 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cta, nep-des, nep-hrm and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2022-14

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