The Dynamics of Delegated Decision Making

This paper investigates the behaviour of multiple decision-maker organisations or bodies, operating in a stochastic environment. Behaviour with a delegated decision maker is examined. A crucial decision is when to delegate to another decision maker. The problem may be intrapersonal, as occurs when there are endogenously changing tastes, or interpersonal where delegation is intuitionally necessary or where decision making is ‘as if’there is delegation. This is possible if decision making is through voting an existence theorem is given. Decisions lead to shifts in control involving option losses and forward-looking recognition of this leads to the endogenous creation of hysteresis. The fact that the behaviour of other agents leads to hysteresis makes it optimal for any single agent to introduce more hysteresis. Organisations or bodies with many possible decision makers operate in one of two regimes, one where hysteresis is small and the other where hysteresis is large. The analysis gives a new view of dynamic behaviour.