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Delegation versus Veto in Organizational Games of Strategic Communication
Author(s) -
MARINO ANTHONY M.
Publication year - 2007
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2007.00340.x
Subject(s) - veto , delegation , microeconomics , divergence (linguistics) , economics , principal (computer security) , work (physics) , quality (philosophy) , shut down , computer science , political science , law , computer security , engineering , management , mechanical engineering , linguistics , philosophy , epistemology , politics , operating system
In organizations, principals use decision rules to govern a more informed agent's behavior. We compare two such rules: delegation and veto. Recent work suggests that delegation dominates veto unless the divergence in preferences between the principal and the agent is so large that informative communication cannot take place. We show that this result does not hold in a reasonable model of veto versus delegation. In this model, veto dominates delegation for any feasible divergence in preferences, if it induces the agent to shut down low quality proposals that he would otherwise implement and if such projects have sufficient likelihood.