Delegating learning. Issue 2 (13th May 2021)

• Record Type: Journal Article
• Authors: Escobar, Juan F.; Zhang, Qiaoxi
• Is Part Of: Theoretical economics. Volume 16:Issue 2(2021)
• Page Start: 571
• Page End: 603
• Publication Date: 2021-05-13
• Subjects: Private learning -- delegation -- delays -- deadlines -- commitment -- cheap talk; D82 -- D83; Economics -- Periodicals; 330.01
• DOI: 10.3982/TE4191
• Languages: English
• ISSNs: 1933-6837

Abstract

Abstract : Learning is crucial to organizational decision making but often needs to be delegated. We examine a dynamic delegation problem where a principal decides on a project with uncertain profitability. A biased agent, who is initially as uninformed as the principal, privately learns the profitability over time and communicates to the principal. We formulate learning delegation as a dynamic mechanism design problem and characterize the optimal delegation scheme. We show that private learning gives rise to the trade‐off between how much information to acquire and how promptly it is reflected in the decision. We discuss implications on learning delegation for distinct organizations.