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

Author

Listed:
  • Mehdi Ayouni

    (Université de Lorraine, Université de Strasbourg, CNRS, BETA)

  • Franck Bien

    (Université Paris – Dauphine, PSL Research University, LEDa, LEGOS)

  • Thomas Lanzi

    (Université de Lorraine, Université de Strasbourg, CNRS, BETA)

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) the principal is committed to taking an action that is payoff-relevant for both parties if the agent rejects the proposed contract and (ii) the principal can contractually extract surplus from the agent.

Suggested Citation

  • Mehdi Ayouni & Franck Bien & Thomas Lanzi, 2023. "The failure of the delegation principle in a principal-agent model with transfers," Economics Bulletin, AccessEcon, vol. 43(1), pages 518-525.
    • Handle: RePEc:ebl:ecbull:eb-22-00304
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Contract; Delegation; Information; Transfers;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D2 - Microeconomics - - Production and Organizations

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