Delegation and dynamic incentives

• 成果类型: Article
• 署名作者: Shin, Dongsoo; Strausz, Roland
• 署名单位: Santa Clara University; Humboldt University of Berlin
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12059
• 发表日期: 2014
• 页码: 495-520
• 关键词: Common agency; INFORMATION; RENEGOTIATION; COMMITMENT; authority; DESIGN

摘要

Using an agency model, we show how delegation, by generating additional private information, improves dynamic incentives under limited commitment. It circumvents ratchet effects and facilitates the revelation of persistent private information through two effects: a play-hardball effect, which mitigates an efficient agent's ratchet incentive, and a carrot effect which reduces an inefficient agent's take-the-money-and-run incentive. Although delegation entails a loss of control, it is optimal when uncertainty about operational efficiency is large. Moreover, delegation is more effective with production complementarity. We also consider different modes of commitment to yield insights into optimal organizational boundaries.