Delegation of Learning vs Delegation of Decision Making

Economics

Speaker:Arina Nikandrova, Birkbeck, University of London
Date: Friday 9 March 2018
Time: 3.30pm
Location: Kolade Teaching Room, Building One

Further details

We study a dynamic model where a principal delegates learning about the unknown state of the world to a biased expert. Conditional on the state of the world, both the principal and the expert agree on the optimal action, but at either state of the world, the expert obtains a higher payoff than the principal from one of the actions. Before taking the action, the expert may collect information from two alternative sources. We compare Markov-perfect equilibria when the principal delegates only the learning and when he delegates both learning and taking the action. The principal has no commitment power and he cannot make (contingent) transfers. The model can help understand the limits of representative democracy.