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Mehdi Ayouni, Franck Bien and Thomas Lanzi
 
''The failure of the delegation principle in a principal-agent model with transfers''
( 2023, Vol. 43 No.1 )
 
 
In a principal-agent model with monetary transfers, we show that the delegation principle always fails even if preferences are perfectly aligned. This result holds if (i) the principal is committed to taking an action that is payoff-relevant for both parties if the agent rejects the proposed contract and (ii) the principal can contractually extract surplus from the agent.
 
 
Keywords: Contract; Delegation; Information; Transfers
JEL: D8 - Information, Knowledge, and Uncertainty: General
D2 - Production and Organizations: General
 
Manuscript Received : Apr 11 2022 Manuscript Accepted : Mar 30 2023

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