Optimally Biased Expertise

TL;DR

This paper demonstrates that in delegation scenarios, a principal benefits from intentionally misaligning beliefs with an agent, leading to better decision-making outcomes through the agent's confirmatory learning and strategic uncertainty.

Contribution

It introduces the concept that belief misalignment can be optimal in delegation, showing how it influences agent behavior and improves principal's outcomes even with biases.

Findings

Misaligned beliefs lead to better decision outcomes.

Agents with belief misalignment consider more actions.

Optimal misalignment persists under communication settings.

Abstract

We show that in delegation problems, a principal benefits from belief misalignment vis-\`a-vis an agent when the latter can flexibly acquire costly information. The agent optimally succumbs to confirmatory learning, leading him to favor the ex ante optimal action. We show that the principal prefers to mitigate this by hiring an agent who is ex ante more uncertain about which action is optimal. This is optimal even when the principal is herself biased towards some action: the benefit always outweighs the cost of a small misalignment. Optimally misaligned agent considers weakly more actions than an aligned agent. All results continue to hold when delegation is replaced by communication.