In a principal-agent model with hidden information and no monetary transfers, I establish the Veto-Power Principle: any incentive-compatible outcome can be implemented through veto-based delegation with an endogenously chosen default decision. This result demonstrates the exact nature of...

This paper provides an explanation for the frequently observed phenomenon of 'inefficient micromanagement'. I show that a supervisor may get comprehensively involved into activities of a subordinate although a better option of delegation is available. This inefficiency persists in the absence of...

We study relative performance of stochastic and deterministic mechanisms in a principal-agent model with hidden information and no monetary transfers. We present an example in which stochastic mechanisms perform strictly better than deterministic ones and can implement any outcome arbitrarily...