Template-Type: ReDIF-Paper 1.0
Author-Name: Swagata Bhattacharjee
Author-Name-First: Swagata
Author-Name-Last: Bhattacharjee
Author-Email: swagata.bhattacharjee@ashoka.edu.in
Author-Workplace-Name: Department of Economics, Ashoka University
Title: Delegation Using Forward Induction
Abstract: This paper explores a potentially important role of delegation: as a signal to sustain cooperation in coordination games. I consider a static principal-agent model with two tasks, one of which requires cooperation between the principal and the agent. If there is asymmetric information about the agent's type, the principal with a private belief that the agent is a good type can delegate the first task as a signal of his private belief. This equilibrium is supported by the forward induction argument. I conduct laboratory experiments to test these theoretical predictions and to examine the role of information in equilibrium selection. I find that delegation is used only sometimes to facilitate cooperation; however, when the subjects have information about past sessions, there is a statistically significant increase in the use of delegation. This evidence suggests that information matters in equilibrium selection in Bayesian games.
length: 37
Creation-Date: 20190802
Revision-Date: 
Publication-Status: 
File-URL: https://dp.ashoka.edu.in/ash/wpaper/paper17_0.pdf
File-Format: Application/pdf 
Number: 17
Keywords: Delegation
Keywords: Forward Induction
Keywords: Information
Keywords: Lab Experiment
Handle: RePEc:ash:wpaper:17