Economic Theory Workshop
Tuesday, 2 June 2026, 12.45pm to 2pm
An expert whose preferences are aligned with those of the decision maker may exert hidden costly effort to learn about the payoff-relevant state of nature. The decision maker (principal) can incentivize the expert to refine his signal using either information design or delegation. She can also pay him to participate, but other message- or action-contingent transfers are not feasible. We characterize the solution to each problem under general conditions. Optimal, effort-inducing delegation excludes actions near the `status quo' (the ideal point under the common prior), whereas receiver-led information design restricts the sender's ability to learn about the state near its prior mean. Extremes-refining bi-pooling experiments emerge in both solutions. The two schemes are not equivalent as the former distorts actions whereas the latter coarsens information. We obtain sharp results concerning which scheme is preferred by the principal: information design beats optimal delegation when the expert's marginal cost of information-refinement is high and vice versa.
Speaker(s): Peter Eso
Series: Economic Theory Workshop
Venue:
Nuffield College - Butler Room
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Butler Room Nuffield College New Road Oxford Oxfordshire OX1 1NF United Kingdom
Department: Economics (Department)