TY - JOUR
T1 - Motivating Loyal Bureaucrats in Sequential Agency
AU - Rodivilov, Alexander
AU - Shin, Dongsoo
N1 - Publisher Copyright:
© 2024 Walter de Gruyter GmbH, Berlin/Boston.
PY - 2024/6/1
Y1 - 2024/6/1
N2 - We study a principal-agent model in which a legislature and a bureaucrat sequentially play the principal's role. In the first stage, the legislature offers a menu of transfer payments to the bureaucrat for implementing a public project. In the second stage, the bureaucrat offers a menu of the project attribute levels to the legislature. Then, the legislature decides whether to go forward with the project and aggregates information on the public's valuation of the project. The key trade-off in this paper is information versus the bureaucrat's loyalty. We show that when the bureaucrat is loyal enough to the public, taking advantage of his loyalty requires inducing him to make his decision independent of the public's valuation.
AB - We study a principal-agent model in which a legislature and a bureaucrat sequentially play the principal's role. In the first stage, the legislature offers a menu of transfer payments to the bureaucrat for implementing a public project. In the second stage, the bureaucrat offers a menu of the project attribute levels to the legislature. Then, the legislature decides whether to go forward with the project and aggregates information on the public's valuation of the project. The key trade-off in this paper is information versus the bureaucrat's loyalty. We show that when the bureaucrat is loyal enough to the public, taking advantage of his loyalty requires inducing him to make his decision independent of the public's valuation.
KW - false moral hazard
KW - principal - agent
KW - sequential agency
UR - http://www.scopus.com/inward/record.url?scp=85196898586&partnerID=8YFLogxK
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U2 - 10.1515/bejte-2023-0122
DO - 10.1515/bejte-2023-0122
M3 - Article
AN - SCOPUS:85196898586
SN - 2194-6124
VL - 24
SP - 519
EP - 553
JO - B.E. Journal of Theoretical Economics
JF - B.E. Journal of Theoretical Economics
IS - 2
ER -