Optimally Biased Expertise

CERGE-EI Working Paper Series No. 736

65 Pages Posted: 19 Oct 2022 Last revised: 13 May 2024

See all articles by Pavel Ilinov

Pavel Ilinov

École Polytechnique Fédérale de Lausanne (EPFL)

Andrei Matveenko

University of Mannheim - Department of Economics

Maxim Senkov

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Egor Starkov

University of Copenhagen - Department of Economics

Date Written: March 2024

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

Suggested Citation

Ilinov, Pavel and Matveenko, Andrei and Senkov, Maxim and Starkov, Egor, Optimally Biased Expertise (March 2024). CERGE-EI Working Paper Series No. 736, Available at SSRN: https://ssrn.com/abstract=4231595 or http://dx.doi.org/10.2139/ssrn.4231595

Pavel Ilinov (Contact Author)

École Polytechnique Fédérale de Lausanne (EPFL) ( email )

Quartier UNIL-Dorigny, Bâtiment Extranef, # 211
40, Bd du Pont-d'Arve
CH-1015 Lausanne, CH-6900
Switzerland

Andrei Matveenko

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

Maxim Senkov

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

Egor Starkov

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5, Bygn 26
Copenhagen, 1353
Denmark

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
71
Abstract Views
623
Rank
708,463
PlumX Metrics