Abstract
A team composed of a principal and an agent needs to choose a project to run, while they may have different preferences regarding the project. The agent has various types of bias in terms of project selection, and he can make an effort in acquiring the information regarding the promise of projects. The principal can either keep the decision-making authority of choosing which project to run, or delegate it to the agent. We find that the optimal effort level under the principal's authority is at its highest when the agent is the most biased, while under the agent's authority it is also at its highest when the agent has an intermediate bias. Therefore, the principal should keep the authority and communicate with the agent when the agent is relatively biased, and delegate the authority when the agent has an intermediate bias. However, from the team's point of view where both players’ payoffs are taken into account, the principal may delegate too much authority to a relatively unbiased agent, and too little authority to a relatively biased agent.
| Original language | English |
|---|---|
| Pages (from-to) | 54-71 |
| Number of pages | 18 |
| Journal | Journal of Economic Behavior and Organization |
| Volume | 137 |
| DOIs | |
| Publication status | Published - 2017 May 1 |
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Keywords
- Agent's bias
- Information acquisition
- Optimal delegation
ASJC Scopus subject areas
- Economics and Econometrics
- Organizational Behavior and Human Resource Management
Cite this
Optimal delegation with self-interested agents and information acquisition. / Omiya, Shungo; Tamada, Yasunari; Tsai, Tsung Sheng.
In: Journal of Economic Behavior and Organization, Vol. 137, 01.05.2017, p. 54-71.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Optimal delegation with self-interested agents and information acquisition
AU - Omiya, Shungo
AU - Tamada, Yasunari
AU - Tsai, Tsung Sheng
PY - 2017/5/1
Y1 - 2017/5/1
N2 - A team composed of a principal and an agent needs to choose a project to run, while they may have different preferences regarding the project. The agent has various types of bias in terms of project selection, and he can make an effort in acquiring the information regarding the promise of projects. The principal can either keep the decision-making authority of choosing which project to run, or delegate it to the agent. We find that the optimal effort level under the principal's authority is at its highest when the agent is the most biased, while under the agent's authority it is also at its highest when the agent has an intermediate bias. Therefore, the principal should keep the authority and communicate with the agent when the agent is relatively biased, and delegate the authority when the agent has an intermediate bias. However, from the team's point of view where both players’ payoffs are taken into account, the principal may delegate too much authority to a relatively unbiased agent, and too little authority to a relatively biased agent.
AB - A team composed of a principal and an agent needs to choose a project to run, while they may have different preferences regarding the project. The agent has various types of bias in terms of project selection, and he can make an effort in acquiring the information regarding the promise of projects. The principal can either keep the decision-making authority of choosing which project to run, or delegate it to the agent. We find that the optimal effort level under the principal's authority is at its highest when the agent is the most biased, while under the agent's authority it is also at its highest when the agent has an intermediate bias. Therefore, the principal should keep the authority and communicate with the agent when the agent is relatively biased, and delegate the authority when the agent has an intermediate bias. However, from the team's point of view where both players’ payoffs are taken into account, the principal may delegate too much authority to a relatively unbiased agent, and too little authority to a relatively biased agent.
KW - Agent's bias
KW - Information acquisition
KW - Optimal delegation
UR - http://www.scopus.com/inward/record.url?scp=85015669976&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85015669976&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2017.03.003
DO - 10.1016/j.jebo.2017.03.003
M3 - Article
AN - SCOPUS:85015669976
VL - 137
SP - 54
EP - 71
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
SN - 0167-2681
ER -