Delegation and Strategic Silence

Abstract

We consider an incomplete contracting model with three stages: advice, choice, and execution. Each party has imperfect private information on the project, and executing the project is costly. The principal’s project choice reveals her information, which may discourage the agent’s costly execution by denting his motivation. Rubber-stamping the agent’s advice about the project choice allows the principal to avoid discouragement. However, the agent may be intentionally silent to prompt the principal to reveal her information through the project choice. The agent’s strategic silence may prevent informal delegation even when the principal has no incentive to overturn the agent’s advice.

Keywords: Delegation, Advice, Choice, and Execution, Confidence, Empowerment, Strategic Silence

JEL Classification: D23, D83, D86, M12