Delegation Versus Veto in Organizational Games of Strategic Communication
20 Pages Posted: 14 Jul 2006
Date Written: July 5, 2006
In organizations, principals use decision rules to govern a more informed agent's behavior. We compare two such rules: delegation and veto. Recent work suggests that delegation dominates veto unless the divergence in preferences between the principal and the agent is so large that informative communication can not take place. We show that this result does not hold in a reasonable model of veto versus delegation. In this model, veto dominates delegation for any feasible divergence in preferences, if it induces the agent to shut down low quality proposals that he would otherwise implement and if such projects have sufficient likelihood.
Keywords: veto, delegation
JEL Classification: L2
Suggested Citation: Suggested Citation