Nahum Melumad

Centralization Versus Delegation and the Value of Communication

Coauthor(s): Stefan Reichelstein.

Abstract:
In this paper, we attempt to find out under what conditions the performance of an optimal revelation mechanism can be replicated by a delegation scheme which does not involve communication. We consider a model involving a single privately informed agent. An observable decision is either made by the principal or delegated to the agent. We show that only in special cases are direct delegation schemes' performance equivalent to communication-based centralization schemes.

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