Communication versus (restricted) delegation: An experimental comparison

Sloof will present the paper "Communication versus (restricted) delegation: An experimental comparison", written jointly with Silvia Dominguez-Martinez.

This paper reports the results from a laboratory experiment investigating a managerís decision whether or not to delegate authority to a better informed worker whose interests are often, but not always, congruent. Keeping authority implies a loss of information, as the worker communicates his information strategically. Delegating authority leads to a loss of control. A key aspect of our design is that the manager can restrict the workerís choice set when delegating authority. We Önd that, in case of delegation, managers (as predicted) put tighter restrictions when interests are less aligned. Workers send more informative messages under communication than predicted by the pure strategy equilibria. This Önding neither appears to be driven by lying aversion of workers nor by credulity of managers. Qualitatively, our results are in line with a mixed strategy equilibrium under communication, which strictly outperforms optimalrestricted delegation and is relatively close to the optimal stochastic mechanism in our setting.

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