Repeated delegation (Q785526)
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English | Repeated delegation |
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Repeated delegation (English)
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7 August 2020
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The authors study properties of the following economic model. ``We consider an infinite-horizon game played between a principal P and an agent A, time is discrete. The principal and the agent play the same stage game in every period. Each period the principal chooses whether or not to delegate a project adoption choice to the agent, i.e. P publicly decides whether to freeze project adoption or to delegate it. If P freezes the project, then no project is adopted and the payoff of both players is zero. If P delegates the project, then A decides whether or not to initiate it. The current period's project is good with a given probability and bad with complement probability.'' P prefers good projects to nothing, but prefers inactivity to bad projects. The authors characterize equilibrium payoffs at fix discounting and show that Pareto optimal equilibria are implemented.
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delegation
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limited commitment
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repeated game
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capital budgeting
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