DP12706 Delegated Expertise, Authority, and Communication

Author(s): Inga Deimen, Dezso Szalay
Publication Date: February 2018
Keyword(s): delegated expertise, delegation, effectiveness of biased communication, endogenous information, strategic information transmission
JEL(s): D82
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12706

A decision-maker needs to reach a decision and relies on an expert to acquire information. Ideal actions of expert and decision-maker are partially aligned and the expert chooses what to learn about each. The decision-maker can either get advice from the expert or delegate decision-making to him. Under delegation, the expert learns his privately optimal action and chooses it. Under communication, advice based on such information is discounted, resulting in losses from strategic communication. We characterize the communication problems that make the expert acquire information of equal use to expert and decision-maker. In these problems, communication outperforms delegation.