Optimal contingent delegation

Gan, Tan ORCID: 0000-0002-9483-7869, Hu, Ju and Weng, Xi (2023) Optimal contingent delegation. Journal of Economic Theory, 208. ISSN 0022-0531

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Abstract

This paper investigates a two-agent mechanism design problem without transfers, where the principal must decide one action for each agent. In our framework, agents only care about their own adaptation, and any deterministic dominant incentive compatible decision rule is equivalent to contingent delegation: the delegation set offered to one agent depends on the other's report. By contrast, the principal cares about both adaptation and coordination. We provide sufficient conditions under which contingent interval delegation is optimal and solve the optimal contingent interval delegation under fairly general conditions. Remarkably, the optimal interval delegation is completely determined by combining and modifying the solutions to a class of simple single-agent problems, where the other agent is assumed to report truthfully and choose his most preferred action.

Item Type:	Article
Additional Information:	© 2022 Elsevier Inc.
Divisions:	LSE
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M11 - Production Management
Date Deposited:	12 Sep 2024 09:24
Last Modified:	17 Oct 2024 18:19
URI:	http://eprints.lse.ac.uk/id/eprint/125399

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