Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333506 
Year of Publication: 
2025
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 753
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
In our principal-agent model, the principal can repeatedly delegate authority to an agent with uncertain preferences or take the decisions himself. The principal learns the state at the end of each period and then updates his belief about the agent's bias based on the decision implemented if he delegated authority. We demonstrate that equilibria are characterized by an "imitation" interval of agent types (biases) who mimic less biased types in order to be retained. Interestingly, the principal generally benefits from the agent's imitation compared to a benchmark. Furthermore, comparative statics reveal that, surprisingly, the principal may be worse off with better information. Finally, an extension to finitely many periods shows that the imitation interval gradually shifts, such that agent types within the interval imitate less biased types.
Subjects: 
Delegation
preference uncertainty
private information
dynamic game
organizational design
JEL: 
D23
D82
D83
D73
C72
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Working Paper

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