- Bocconi University
Wednesday, February 22, 2017
Polo Santa Marta, Via Cantarane 24, Room 1.59
We study the delegation problem between an investor and a financial intermediary, who is not only privately informed about the state of the world but also has superior awareness of the available investment opportunities. Under some regularity conditions on the state distribution, we show that the intermediary has incentives to make the investor aware of investment opportunities at the extremes, e.g. very risky and very safe projects, while leaving the investor unaware of intermediate investment options. Hence, unlike in the benchmark case of full awareness, the equilibrium delegation set is not an interval but has a gap in the middle.