Economics Webinar - Optimal Delegation with Information Design

A principal seeks to influence the decision-making of a potentially informed but biased agent. There are no monetary transfers, but the principal can jointly control the actions and information available to the agent. With general preferences I show that the agent is optimally given a discrete menu of options to pick from. This implies that disclosing fully the state is suboptimal. With linear preferences I further identify sufficient conditions for optimality of perfect alignment of incentives and monotone partitional information structures. I then turn to the uniform-quadratic case which permits an explicit characterization of optimal joint mechanisms and clear comparative statics. Finally, I discuss two applications: the regulation of a monopolist, and the self-control of a dynamically inconsistent individual.