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Delegation and information revelation

Author

Listed:
  • Gautier, Axel

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Paolini, Dimitri

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

This paper addresses the question of delegation in an organization where there is an initial asymmetry of information between the principal and the agent. We assume that the principal cannot use revelation techniques à la Baron Myerson to elicit agent's superior information and in contrast, we posit that the decision and the state of the world parameter cannot be contracted for. With these simple contracts, we show that delegation is an alternative to contracting to elicit agent's information. We can show that delegated decisions completely reveal the state of the world to the principal. Therefore the principal can extract agent's information by giving up the control right over some decisions. As the organization takes a sequence of decisions, the information learned by the principal can be used for the other decisions. So delegation is only partial: the principal delegates some decisions and keeps control over other.

Suggested Citation

  • Gautier, Axel & Paolini, Dimitri, 2000. "Delegation and information revelation," LIDAM Discussion Papers IRES 2000015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2000015
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    References listed on IDEAS

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    Cited by:

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    2. Axel Gautier & Dimitri Paolini, 2009. "Delegation, externalities and organizational design," Economics Bulletin, AccessEcon, vol. 29(4), pages 2683-2692.
    3. Alonso, Ricardo, 2009. "Strategic control and strategic communication," LSE Research Online Documents on Economics 58682, London School of Economics and Political Science, LSE Library.
    4. John S. Heywood & Zheng Wang, 2016. "Strategic delegation under spatial price discrimination," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 193-213, March.
    5. Krahmer, Daniel, 2006. "Message-contingent delegation," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 490-506, August.
    6. Tigran Melkonyan, 2014. "Decentralization, Incentive Contracts and the Effect of Distortions in Performance Measures," Manchester School, University of Manchester, vol. 82(6), pages 631-652, December.
    7. Yankuo Qiao, 2023. "To delegate or not to delegate? On the quality of voluntary corporate financial disclosure," Review of Managerial Science, Springer, vol. 17(7), pages 2215-2250, October.

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    More about this item

    Keywords

    Asymmetric information; Delegation; Incomplete contracts;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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