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Delegating Multiple Decisions

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  • Alex Frankel

Abstract

This paper shows how to extend the heuristic of capping an agent against her bias to delegation problems over multiple decisions. Caps may be exactly optimal when the agent has constant biases, in which case a cap corresponds to a ceiling on the weighted average of actions. More generally caps give approximately first-best payoffs when there are many independent decisions. The shape of the cap translates into economic intuition on how to let an agent trade off increases on one action for decreases on other actions. I discuss applications to political delegation, capital investments, monopoly price regulation, and tariff policy.

Suggested Citation

  • Alex Frankel, 2016. "Delegating Multiple Decisions," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 16-53, November.
    • Handle: RePEc:aea:aejmic:v:8:y:2016:i:4:p:16-53
    Note: DOI: 10.1257/mic.20130270
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    References listed on IDEAS

    as
    1. Martimort, David & Semenov, Aggey, 2006. "Continuity in mechanism design without transfers," Economics Letters, Elsevier, vol. 93(2), pages 182-189, November.
    2. repec:hal:pseose:halshs-00754576 is not listed on IDEAS
    3. Alexander Frankel, 2014. "Aligned Delegation," American Economic Review, American Economic Association, vol. 104(1), pages 66-83, January.
    4. repec:bla:jindec:v:48:y:2000:i:2:p:137-60 is not listed on IDEAS
    5. Kovác, Eugen & Mylovanov, Tymofiy, 2009. "Stochastic mechanisms in settings without monetary transfers: The regular case," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1373-1395, July.
    6. Koessler, Frédéric & Martimort, David, 2012. "Optimal delegation with multi-dimensional decisions," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1850-1881.
    7. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
    8. Mark A. Satterthwaite & Steven R. Williams, 2002. "The Optimality of a Simple Market Mechanism," Econometrica, Econometric Society, vol. 70(5), pages 1841-1863, September.
    9. Mark Armstrong & John Vickers, 2000. "Multiproduct Price Regulation Under Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 137-160, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lipnowski, Elliot & Ramos, João, 2020. "Repeated delegation," Journal of Economic Theory, Elsevier, vol. 188(C).
    2. Tapas Kundu & Tore Nilssen, 2020. "Delegation of Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 68(3), pages 445-482, September.
    3. Tapas Kundu & Tore Nilssen, 2022. "Delegating pollution permits," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(2), pages 457-487, April.
    4. Gregorio Curello & Ludvig Sinander, 2020. "Screening for breakthroughs," Papers 2011.10090, arXiv.org, revised Mar 2025.
    5. Amador, Manuel & Bagwell, Kyle, 2020. "Money burning in the theory of delegation," Games and Economic Behavior, Elsevier, vol. 121(C), pages 382-412.
    6. Breig, Zachary & Downey, Mitch, 2021. "Agency breadth and political influence," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 253-268.
    7. Alex Frankel, 2021. "Selecting Applicants," Econometrica, Econometric Society, vol. 89(2), pages 615-645, March.
    8. Neven, Damien & Piccolo, Salvatore & Andreu, Enrique, 2021. "Price Authority and Information Sharing with Competing Principals," CEPR Discussion Papers 16753, C.E.P.R. Discussion Papers.
    9. Andreu, Enrique & Neven, Damien & Piccolo, Salvatore, 2023. "Price authority and information sharing with competing supply chains," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    10. Enrique Andreu & Damien Neven & Salvatore Piccolo & Roberto Venturini, 2023. "Upstream conduct and price authority with competing organizations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(4), pages 788-810, October.
    11. Patrick Lahr & Axel Niemeyer, 2024. "Extreme Points in Multi-Dimensional Screening," Papers 2412.00649, arXiv.org.

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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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