The optimality of (stochastic) veto delegation
Fuente:
arXiv
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| Autori principali: | , |
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| Natura: | Preprint |
| Pubblicazione: |
2022
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| _version_ | 1866909318578700288 |
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| author | Hu, Xiaoxiao Lei, Haoran |
| author_facet | Hu, Xiaoxiao Lei, Haoran |
| contents | We analyze the optimal delegation problem between a principal and an agent, assuming that the latter has state-independent preferences. We demonstrate that if the principal is more risk-averse than the agent toward non-status quo options, an optimal mechanism is a {\em veto mechanism}. In a veto mechanism, the principal uses veto (i.e., maintaining the status quo) to balance the agent's incentives and does not randomize among non-status quo options. We characterize the optimal veto mechanism in a one-dimensional setting. In the solution, the principal uses veto only when the state surpasses a critical threshold. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2208_14829 |
| institution | arXiv |
| publishDate | 2022 |
| record_format | arxiv |
| spellingShingle | The optimality of (stochastic) veto delegation Hu, Xiaoxiao Lei, Haoran Theoretical Economics We analyze the optimal delegation problem between a principal and an agent, assuming that the latter has state-independent preferences. We demonstrate that if the principal is more risk-averse than the agent toward non-status quo options, an optimal mechanism is a {\em veto mechanism}. In a veto mechanism, the principal uses veto (i.e., maintaining the status quo) to balance the agent's incentives and does not randomize among non-status quo options. We characterize the optimal veto mechanism in a one-dimensional setting. In the solution, the principal uses veto only when the state surpasses a critical threshold. |
| title | The optimality of (stochastic) veto delegation |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2208.14829 |