MET Seminar - Tan Gan (LSE)

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Title: Robust Delegation Authors: Ricardo Alonso, Tan Gan & Ju Hu Abstract: We study delegation rules by principals uninformed of the underlying state (external uncertainty) and the preferences of better-informed agents (internal uncertainty). Evaluating delegation sets with a max–min criterion, we show that optimal delegation sets are flexible: for broad classes of preference uncertainty, the principal allows any intermediate action. That is, robustly optimal delegation sets are convex. Thus, interval delegation is always robustly optimal when the action space is unidimensional. Internal uncertainty can justify greater discretion, allowing actions that are never optimal for the principal in any state; and a version of the ally principle holds: alignment along enough actions/dimensions implies unconstrained delegation. Contact: sophie.kreutzkamp@manchester.ac.uk