Who to Listen to? A Model of Endogenous Delegation

Oct 15, 2026

William Fuchs, Satoshi Fukuda, Mayar Sefidgaran

An organization must often make a collective decision on behalf of two units that hold different private information, prefer different outcomes, and cannot use monetary transfers. We ask which unit’s information should govern the collective decision, and within what limits. The organization commits to a decision rule before either unit learns its private information, and may choose any rule satisfying Bayesian incentive compatibility. Our main result is that when the units’ ranges of possible preferred actions do not overlap and the organization’s uninformed compromise falls inside one of them, the rule that is optimal over all incentive-compatible arrangements is constrained delegation. Authority goes to the unit whose preferred action is harder to predict or whose performance carries greater weight, and the delegate’s discretion narrows as the units’ objectives diverge. When conflict is more severe, the organization ignores both reports and decides from its prior. Delegation is therefore derived rather than assumed. When the units’ ranges of preferred actions overlap, the organization uses both reports but responds less to extreme recommendations. We state six predictions covering who should decide, how wide a mandate should be, when consultation is worth its cost, and how organizational grouping and shared objectives change the cost of using local information. We also assess each against available evidence.


William Fuchs

William Fuchs

UT Austin

Satoshi Fukuda

Satoshi Fukuda

Mayar Sefidgaran

Mayar Sefidgaran