Essays on Commitment and Delegation

Author:

Teoman, Ece

Graduate Program:

Economics

Degree:

Doctor of Philosophy

Document Type:

Dissertation

Date of Defense:

June 12, 2023

Committee Members:

Chloe Tergiman, Outside Unit & Field Member
Nageeb Ali, Chair & Dissertation Advisor
Rohit Lamba, Major Field Member
Vijay Krishna, Major Field Member
Miaomiao Dong, Major Field Member
Marc Henry, Professor in Charge/Director of Graduate Studies

Keywords:

delegation
commitment
agenda setting
principal-agent problem
voting games
political economy
project selection
mechanism design
dynamic games

Abstract:

In the first chapter "Agenda-Setting with Legislative Precommitments", I consider an agenda setting environment where the voters commit upfront to the reforms they are willing to pass, and the agenda setter chooses from among the passable reforms or the status quo. I first characterize the outcomes that emerge in subgame perfect equilibria of this game with majoritarian voting rules. Motivated by the weak predictive power of subgame perfection for this game, I consider a refinement to account for the possibility of coalitional deviations. Compared to the predictions of standard models, the agenda setter's power is significantly reduced in this game, especially in the presence of coalitions and with simple majority rule. The second chapter "The Art of Waiting", joint work with Vasundhara Mallick, studies delegated project choice without commitment: a principal and an agent have conflicting preferences over which project to implement, and the agent is privately informed about the availability of projects. We consider a dynamic setting in which, until a project is selected, the agent can propose a project, and the principal can accept or reject the proposed project. Importantly, the principal cannot commit to his responses. In this setting, the agent has an incentive to hold back on proposing projects that the principal favors so that the principal approves a project favored by the agent. Nevertheless, the principal achieves his commitment payoff in an equilibrium of the game in the frequent-offer limit. This high payoff equilibrium showcases the art of waiting and contrasts with Coasian logic: by giving proposer power to the agent, the principal makes it credible to reject his dispreferred projects until later in the game giving the agent an incentive to propose principal-preferred projects earlier on. We apply these results to the economics of organization and merger analysis. In particular, these results suggest a pure strategic gain from giving workers the initiative to pursue their desired projects, and to solicit their ideas "bottom-up" rather than issuing "top-down" commands.