Optimal delegation via a strategic intermediary

• 成果类型: Article
• 署名作者: Liang, Pinghan
• 署名单位: Southwestern University of Finance & Economics - China
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2013.06.008
• 发表日期: 2013
• 页码: 15-30
• 关键词: delegation; Intermediary; hierarchies

摘要

This paper studies the optimal design of delegation rule in a three-tier principal-intermediary-agent hierarchy. In this hierarchy, monetary transfer is not feasible, delegation is made sequentially, and all players are strategic. We characterize the optimal delegation mechanism. It is shown that the single-interval delegation a la Holmstrom is optimal only when the intermediary is moderately biased. Otherwise, as responses to the distortion caused by a biased intermediary, the optimal delegation set may involve a hole. Thus, multi-interval delegation set would arise when subordinates have opposing biases. This result sheds some light on policy threshold effects: slight changes in the underlying state cause a jump in the policy responses. (C) 2013 Elsevier Inc. All rights reserved.