Journal of Economic Theory (2024)
A principal delegates decisions to a biased agent. Payoffs depend on a state that the principal cannot observe. Initially, the agent does not observe the state, but he can acquire information about it at a cost. We characterize the principal's optimal delegation set. This set features a cap on high decisions and a gap around the agent's ex ante favorite decision. The set may even induce ex-post Pareto-dominated decisions. Under certain conditions on the cost of information acquisition, we show that the principal prefers delegating to an agent with a small bias than to an unbiased agent.
Games and Economic Behavior, Revise and Resubmit
We consider a sender--receiver game in which the receiver's action is binary and the sender's preferences are state-independent. The state is multidimensional. The receiver can select one dimension of the state to check (i.e., observe) before choosing his action. We identify a class of influential equilibria in which the sender's message reveals which components of the state are highest, and the receiver selects one of these components to check. The sender can benefit from communication if and only if she prefers one of these equilibria to the no-communication outcome. Similar equilibria exist when the receiver can check multiple dimensions.