In this article we study the value of delegating authority over income tax audit policy, arising from the incompleteness of contracts. Consider a utilitarian government whose ability to commit is limited to aggregate dimensions of its audit policy, as publicly verifiable information about...

Agents in a hierarchy are commonly delegated authority to communicate and contract with agents at lower levels. While delegation reduces the burden of communication and information processing on the principal, it also introduces additional incentive problems. We find that with sufficient...