Optimally Biased Expertise

Abstract

This paper shows that in delegation problems, a biased principal can
strictly benefit from hiring an agent with misaligned preferences or beliefs.
We consider a “delegated expertise” problem in which the agent has an ad-
vantage in acquiring information relative to the principal. We show that it is
optimal for a principal who is ex ante biased towards one action to select an
agent who is less biased. Such an agent is more uncertain ex ante about what
the best course of action is and would acquire more information. The benefit
to the principal from a more informed decision always outweighs the cost of a
small misalignment. We show that selecting an optimally misaligned agent is
a valuable tool, which performs on par with optimal contracting (while impos-
ing no additional cost on the principal) and outperforms restricted delegation.
All results continue to hold when delegation is replaced by communication.

Keywords: delegation, rational inattention, heterogeneous beliefs, discrete choice

JEL Classification: D82, D83, D91, M51