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Mylovanov, Tymofiy (January 2005): Veto-Based Delegation. SFB/TR 15 Discussion Paper No. 129 [PDF, 256kB]


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 commitment powers required by the principal: (1) to design the default outcome and (2) to ensure that she has almost no formal control over the agent's decisions.

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