Why Principals Tolerate Biases of Inaccurate Agents

15 Pages Posted: 11 Feb 2019

See all articles by Kimiko Terai

Kimiko Terai

Keio University - Faculty of Economics

Amihai Glazer

University of California, Irvine - Department of Economics

Date Written: March 2019

Abstract

Some agents are more accurate than others in estimating the best policy. The more accurately an agent estimates a policy's effects, the more he will resist biases, such as bribes from a special interest. Thus, a special interest needs to pay a larger bribe to an accurate agent than to an inaccurate agent. The accurate agent who is biased will then more likely cause harm than does an inaccurate agent who favors the special interest. Therefore, the principal may gain more from controlling biases of an accurate agent than of an inaccurate one. Thus, high ability of public officials may be associated with little corruption.

Keywords: bureaucracy, principalā€agent problem, special interests

Suggested Citation

Terai, Kimiko and Glazer, Amihai, Why Principals Tolerate Biases of Inaccurate Agents (March 2019). Economics & Politics, Vol. 31, Issue 1, pp. 97-111, 2019. Available at SSRN: https://ssrn.com/abstract=3331964 or http://dx.doi.org/10.1111/ecpo.12119

Kimiko Terai (Contact Author)

Keio University - Faculty of Economics ( email )

2-15-45 Mita, Ninato-ku
Tokyo 1088345
Japan

Amihai Glazer

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States
949-854-6563 (Phone)
949-824-2182 (Fax)

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