Veto-based delegation

In a principal–agent model with hidden information and no monetary transfers, I establish the veto-power principle: the principal can implement an optimal outcome through veto-based delegation with a properly chosen default decision. This result demonstrates the exact nature of commitment powers req...

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Published in:Journal of economic theory 2008, Vol.138 (1), p.297-307
Main Author: Mylovanov, Tymofiy
Format: Article
Language:English
Subjects:
Agency theory
Asymmetric information
Delegation
Economic models
Implementation
No monetary transfers
Principal-agent theory
Principal–agent relationship
Studies
Transfer
Veto
Veto power
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description In a principal–agent model with hidden information and no monetary transfers, I establish the veto-power principle: the principal can implement an optimal outcome through veto-based delegation with a properly chosen default decision. This result demonstrates the exact nature of commitment powers required by the principal: to design the default outcome and to ensure that she has almost no formal control over the agent's decisions.
doi_str_mv 10.1016/j.jet.2007.02.004
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source International Bibliography of the Social Sciences (IBSS); ScienceDirect Freedom Collection
subjects Agency theory
Asymmetric information
Delegation
Economic models
Implementation
No monetary transfers
Principal-agent theory
Principal–agent relationship
Studies
Transfer
Veto
Veto power
title Veto-based delegation
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