Using an agency model, we show how delegation, by generating additional private information, improves dynamic … effect which reduces an inefficient agent’s take-the-money-and-run incentive. Although delegation entails a loss of control …, it is optimal when uncertainty about operational efficiency is large. Moreover, delegation is more effective with …

of risk aversion, the higher the agency costs for delegation and hence the less profitable is a flexible contract versus … rigid, non discretionary contracts. Delegation grants some flexibility in the choice of the action by the agent, but also … play then an important role in determining the costs of delegation. The main focus of the paper lies indeed in the analysis …