Giving Advice Versus Making Decisions: Transparency, Information, and Delegation

We generalize standard delegation models to consider policymaking when both information and authority are dispersed among multiple actors. In our theory, the principal may delegate partial authority to a privately informed agent while also reserving some authority for the principal’s use after observing the agent’s decision. Counterintuitively, the equilibrium amount of authority delegated to the agent is increasing in the preference divergence between the principal and agent. We also show that the amount of authority delegated depends upon whether the agent can observe the principal’s own private information (a condition we refer to as “top-down transparency”): this form of transparency increases the authority that must be delegated to the agent to obtain truthful policymaking. Accordingly, such transparency can result in less-informed policymaking. Nonetheless, the principal will sometimes but not always voluntarily choose such transparency.