We present a model in which a principal delegates the choice of project to an agent with different preferences. A project`s characteristics are verifiable once presented to the principal, but the principal does not know how many projects are available to the agent. The principal chooses the set of projects which the agent can implement. Three frameworks are considered: (i) a static setting in which the set of available projects is exogenous to the agent but uncertain; (ii) a dynamic setting in which by expending effort the agent can affect the number of projects, and (iii) a dynamic setting in which the agent must wait for projects to materialize. The model is applied to the choice of welfare standard for merger policy.
[1]
Sven-Olof Fridolfsson,et al.
A Consumer Surplus Defense in Merger Control
,
2007
.
[2]
Mark Armstrong,et al.
Delegation and discretion
,
1994
.
[3]
Bengt Holmstrom,et al.
On The Theory of Delegation
,
1980
.
[4]
J. Tirole,et al.
Formal and Real Authority in Organizations
,
1997,
Journal of Political Economy.
[5]
George P. Baker,et al.
Informal Authority in Organizations
,
1999
.
[6]
Michael L. Katz,et al.
The Economics of Welfare Standards in Antitrust
,
2006
.