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Delegated Expertise, Authority, and Communication

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  • Inga Deimen
  • Dezső Szalay

Abstract

A decision maker needs to reach a decision and relies on an expert to acquire information. Ideal actions of expert and decision maker are partially aligned and the expert chooses what to learn about each. The decision maker can either get advice from the expert or delegate decision making to him. Under delegation, the expert learns his privately optimal action and chooses it. Under communication, advice based on such information is discounted, resulting in losses from strategic communication. We characterize the communication problems that make the expert acquire information of equal use to expert and decision maker. In these problems, communication outperforms delegation.

Suggested Citation

  • Inga Deimen & Dezső Szalay, 2019. "Delegated Expertise, Authority, and Communication," American Economic Review, American Economic Association, vol. 109(4), pages 1349-1374, April.
    • Handle: RePEc:aea:aecrev:v:109:y:2019:i:4:p:1349-74
    Note: DOI: 10.1257/aer.20161109
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    Citations

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    Cited by:

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    2. Eduard Alonso‐Pauli & Lluís Bru, 2020. "A note on the impact of the internal organization on the accuracy of the information transmitted within the firm," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(6), pages 902-910, September.
    3. Shuo Liu & Dimitri Migrow, 2019. "Designing organizations in volatile markets," ECON - Working Papers 319, Department of Economics - University of Zurich.
    4. Gesche, Tobias, 2021. "De-biasing strategic communication," Games and Economic Behavior, Elsevier, vol. 130(C), pages 452-464.
    5. Daniel Habermacher, 2022. "Authority and Specialization under Informational Interdependence," Working Papers 142, Red Nacional de Investigadores en Economía (RedNIE).
    6. Dilmé, Francesc, 2022. "Strategic communication with a small conflict of interest," Games and Economic Behavior, Elsevier, vol. 134(C), pages 1-19.
    7. Antinyan, Armenak & Corazzini, Luca & D'Agostino, Elena & Pavesi, Filippo, 2023. "Watch your words: An experimental study on communication and the opportunity cost of delegation," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 216-232.
    8. Ian Ball, 2019. "Scoring Strategic Agents," Papers 1909.01888, arXiv.org, revised May 2024.
    9. Blume, Andreas & Deimen, Inga & Inoue, Sean, 2022. "Incomplete contracts versus communication," Journal of Economic Theory, Elsevier, vol. 205(C).
    10. Antić, Nemanja & Persico, Nicola, 2023. "Equilibrium selection through forward induction in cheap talk games," Games and Economic Behavior, Elsevier, vol. 138(C), pages 299-310.
    11. Bobkova, Nina & Mass, Helene, 2022. "Two-dimensional information acquisition in social learning," Journal of Economic Theory, Elsevier, vol. 202(C).
    12. Szalay, Dezső & Deimen, Inga, 2020. "Authority in a theory of the firm," CEPR Discussion Papers 15026, C.E.P.R. Discussion Papers.
    13. Qianjun Lyu & Wing Suen, 2022. "Information Design in Cheap Talk," Papers 2207.04929, arXiv.org, revised May 2024.
    14. Eduardo Engel & Ronald Fischer & Alexander Galetovic & Jennifer Soto, 2019. "Financing PPP Projects with PVR Contracts: Theory and Evidence from the UK and Chile," Documentos de Trabajo 347, Centro de Economía Aplicada, Universidad de Chile.
    15. Liu, Shuo & Migrow, Dimitri, 2022. "When does centralization undermine adaptation?," Journal of Economic Theory, Elsevier, vol. 205(C).
    16. Dino Gerardi & Lucas Maestri & Ignacio Monzon, 2023. "Delegation with Endogenous States," Carlo Alberto Notebooks 711 JEL Classification: C, Collegio Carlo Alberto.
    17. Mats Köster & Paul Voss, 2023. "Conversations," CESifo Working Paper Series 10275, CESifo.
    18. Daniel Habermacher, 2022. "Information Aggregation in Multidimensional Cheap Talk," Working Papers 169, Red Nacional de Investigadores en Economía (RedNIE).
    19. Herresthal, Claudia, 2022. "Hidden testing and selective disclosure of evidence," Journal of Economic Theory, Elsevier, vol. 200(C).

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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