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Organization of delegated expertise

Subject

Finance

Publishing details

Authors / Editors

Gromb D;Martimort D

Publication Year

2004

Abstract

This paper proposes a theory of the optimal organization of expertise. We develop a Principle of Incentives for Expertise: an expert is rewarded if his recommendation is confirmed either by the facts or by other experts' recommendations. Building on this Principle, we show that agency costs of delegated expertise exhibit diseconomies of scale. Possible organiszational responses to this problem include basing decisions of a less than optimal amount of information, and relying on multiple experts.

Publication Research Centre

Institute of Finance and Accounting

Series Number

FIN 403

Series

IFA Working Paper

Available on ECCH

No


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