The Organization of Delegated Expertise

46 Pages Posted: 7 Oct 2004

See all articles by Denis Gromb

Denis Gromb

HEC Paris

David Martimort

University of Toulouse 1 - Industrial Economic Institute (IDEI); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 2004

Abstract

This Paper proposes a theory of the optimal organization of delegated expertise. For incentive purposes, a principal should reward an expert when their recommendation is confirmed either by the facts or by other experts' recommendations. With a single expert, we show that the agency costs of delegated expertise exhibit diseconomies of scale. Possible organizational responses to this problem include basing decisions on a less than optimal amount of information, and relying on multiple experts. We analyze the source of gains from having multiple experts in different contracting environments corresponding to different nexi of collusion between the principal and/or the experts.

Keywords: Expertise, organization, collusion

JEL Classification: D80

Suggested Citation

Gromb, Denis and Martimort, David, The Organization of Delegated Expertise (August 2004). CEPR Discussion Paper No. 4572. Available at SSRN: https://ssrn.com/abstract=601943

Denis Gromb (Contact Author)

HEC Paris

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

David Martimort

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 6112 8614 (Phone)
+33 5 6112 8637 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
35
Abstract Views
1,025
PlumX Metrics