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Delegating Decisions to Independent Committees

Author

Listed:
  • Narumi Teshima

    (Graduate School of Economics, Keio University and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN)

Abstract

This paper analyzes the delegation of binary decisions to a committee of homogeneous agents. The principal determines the committee size and a reward scheme contingent on the revealed state and the committee's choice. Agents can acquire private information at a cost but lack intrinsic motives to make correct decisions. The main results are as follows: For any committee size and any prior distribution of the state, the reward scheme that minimizes the cost of making agents acquire information induces the committee to make decisions by majority rule. If the principal is ex-ante indifferent between the two alternatives, the optimal reward scheme for the principal induces the committee to use the majority rule and the optimal committee size is inversely U-shaped regarding information quality.

Suggested Citation

  • Narumi Teshima, 2024. "Delegating Decisions to Independent Committees," Discussion Paper Series DP2024-25, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2024-25
    as

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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2024-25.pdf
    File Function: First version, 2024
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    More about this item

    Keywords

    Moral hazard; Free-rider problem; Majority rule; Committee size; Information acquisition; Monetary transfers;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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