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| Title: | | Relational Delegation  |
| Authors: | | Alonso, Ricardo Matouschek, Niko |
| Issue Date: | | 2005 |
| Series/Report no.: | | IZA Discussion paper series 1454 |
| Abstract: | | We explore the optimal delegation of decision rights by a principal to a better informed but biased agent. In an infinitely repeated game a long lived principal faces a series of short lived agents. Every period they play a cheap talk game ala Crawford and Sobel (1982) with constant bias, quadratic loss functions and general distributions of the state of the world. We characterize the optimal delegation schemes for all discount rates and show that they resemble organizational arrangements that are commonly observed, including centralization and threshold delegation. For small biases threshold delegation is optimal for almost all distributions. Outsourcing can only be optimal if the principal is sufficiently impatient. |
| Subjects: | | delegation cheap talk relational contract |
| JEL: | | D82 D23 L23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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