The Korean Economic Review
The Allocation of Authority and Information Revelation
Dongryul Lee (Sungshin University)Year 2014Vol. 30No. 1
We study the allocation of authority and the possibility of information revelation in aprincipal-agent model where the principal faces both problems of adverse selection andmoral hazard. We find that the consideration for information asymmetry and effortincentive for the agent makes the principal more likely delegate. Interestingly, we find thatthe informed agent has an ex-ante incentive to commit to reveal his information to theprincipal voluntarily if the information is hard.