In many economic settings it is optimal to endow individuals with high abilities, rather than those with low abilities, with decision-making power. Yet there is rich empirical evidence showing that many of those in charge of decisions are not necessarily the most talented. We offer a novel rationale for why choosing a decision maker with low ability might be welfare-optimal. In a setting with two-sided information acquisition where the players disagree only when uninformed, we show that a high-ability principal optimally delegates authority to a low-ability agent because the latter not only exerts higher effort than under centralized decision-making, but also follows the principal’s advice when uninformed himself.

Link to paper: warwick.ac.uk/fac/soc/economics/staff/shidir/paper_12_august.pdf

Please sign up for meetings here: docs.google.com/spreadsheets/d/1G0KdCfEkG4LYBuDSCLxyGRSEULv3_smLEEQMofG4X5U/edit#gid=0