Titelaufnahme

We study the delegation problem between a principal and an agent, who not only has better information about the performance of the available actions but also superior awareness of the set of actions that are actually feasible. We provide conditions under which the agent nds it optimal to leave the principal unaware of relevant options. By doing so, the agent increases the principal's cost of distorting the agent's choices and increases the principal’s willingness to grant him higher information rents. We further show that the principal may use the option of renegotiation as a tool to implement actions that are not describable to her at the contracting stage. If the agent renegotiates, his proposal signals information about the payo state. We demonstrate that limited awareness of actions improves communication in such games: the principal makes a coarser inference from the recommendations of the privately informed agent and accepts a larger number of his proposals.