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A model of delegated project choice

Armstrong, Mark and Vickers, John (2009): A model of delegated project choice.

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We present a model in which a principal delegates the choice of project to an agent with different preferences. The principal determines the set of projects from which the agent may choose. The principal can verify the characteristics of the project chosen by the agent, but does not know which other projects were available to the agent. We consider situations where the collection of available projects is exogenous to the agent but uncertain, where the principal cannot observe the agent's payoff, where the principal can pay the agent to choose a desirable project, and where the agent must invest effort to discover a project.

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