Optimal Delegation with Multiple Agents

Charles Angelucci (Columbia University)

Abstract : This paper investigates the issue of optimal delegation in the presence of multiple agents. Specifically, we analyze the design of decision rules by a principal who relies on two biased agents to inform her decision. Each agent’s type/information is private information. The principal would like to implement an action that matches the state of nature, where the state of nature is the sum of the agents’ types/information. The principal is unable to use monetary transfers, and the information the agents possess is complementary and non-overlapping. The principal is able to commit to a decision rule that maps the agents’ unverifiable reports into a single dimensional decision. The solution concept used is that of ex post implementation. We show the optimal robust mechanism can be implemented via a sequential delegation rule. According to the rule, the principal allows the first agent (chosen at random) to either choose an action from a delegation set or delegate the decision to the second agent, who in turn chooses an action from a delegation set.

Simple Optimal Contracts with a Risk-taking Agent

Daniel Barron (Northwestern)
George Georgiadis (Northwestern)
Jeroen Swinkels (Northwestern)

Abstract : Consider an agent who can costlessly add mean-preserving noise to his output. Then, the principal can do no better than offer weakly concave incentives to deter risk-taking. If the agent is risk-neutral and protected by limited liability, optimal incentives are strikingly simple: linear contracts maximize profit. If the agent is risk averse, we characterize the unique optimal contract and provide conditions under which it takes an intuitive form. We extend our model to analyze costly risk-taking, and we show that the model can be reinterpreted as a dynamic setting in which the agent can manipulate the timing of output.