Abstract
A principal delegates decisions to a biased agent. Payoffs depend on a state that the principal cannot observe. Initially, the agent does not observe the state, but he can acquire information about it at a cost. We characterize the principal's optimal delegation set. This set features a cap on high decisions and a gap around the agent's ex ante favorite decision. The set may even induce ex-post Pareto-dominated decisions. Under certain conditions on the cost of information acquisition, we show that the principal prefers delegating to an agent with a small bias than to an unbiased agent.
Original language | English |
---|---|
Article number | 105816 |
Journal | Journal of Economic Theory |
Volume | 217 |
Early online date | 12 Mar 2024 |
DOIs | |
Publication status | Published - Apr 2024 |
Keywords
- delegation
- information acquisition
- benefiting from bias