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Decision rules and information provision: monitoring versus manipulation

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  • Palumbo, Giuliana
  • Iossa, Elisabetta

Abstract

The paper focuses on the organization of institutions designed to resolve disputes between two parties, when some information is not veriable and decision makers may have vested preferences. It shows that the choice of how much discretional power to grant to the decision maker and who provides the information are intrinsically related. Direct involvement of the interested parties in the supply of information enhances monitoring over the decision maker, although at the cost of higher manipulation. Thus, it is desirable when the decision maker is granted high discretion. On the contrary, when the decision maker has limited discretional power, information provision is better assigned to an agent with no direct stake. The analysis helps to rationalize some organizational arrangements that are commonly observed in the context of judicial and antitrust decision-making.

Suggested Citation

  • Palumbo, Giuliana & Iossa, Elisabetta, 2002. "Decision rules and information provision: monitoring versus manipulation," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 452, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
  • Handle: RePEc:fgv:epgewp:452
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    Cited by:

    1. Anderlini Luca & Felli Leonardo & Postlewaite Andrew, 2011. "Should Courts Always Enforce What Contracting Parties Write?," Review of Law & Economics, De Gruyter, vol. 7(1), pages 14-28, February.
    2. Bruno Deffains & Dominique Demougin, 2008. "The Inquisitorial and the Adversarial Procedure in a Criminal Court Setting," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 31-43, March.

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