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

Author

Listed:
  • Mehdi Ayouni

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Franck Bien

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Thomas Lanzi

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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 relationship with transfers," Post-Print hal-04569618, HAL.
    • Handle: RePEc:hal:journl:hal-04569618
    as

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