Constraining to Motivate

Liqun Liu

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arXiv · 2111.00522

Constraining to Motivate

Liqun Liu

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Abstract

Effective decision-making often involves a principal delegating authority to better-informed agents. However, when agents'careers depend on how their decisions are perceived, they may avoid acquiring costly information and instead choose politically safe actions. We propose a simple solution: constrained delegation. By restricting the agent's choice set, the principal can reshape the reputational stakes attached to the remaining options and restore incentives to acquire information. The mechanism applies broadly to settings where political or market-based incentives discourage information acquisition and shows how limiting discretion can, counterintuitively, improve decision quality.

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Liqun Liu. 2021-10-31. Constraining to Motivate. https://arxiv.org/abs/2111.00522

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