Information, delegation and communication:

This paper examines the optimal decision-making procedure in a cheap-talk model with an exogenously informed agent and endogenous information acquisition by the principal. I analyze two kinds of equilibria: the equilibrium with the most informative communication and the partial pooling equilibrium in which the principal has acquired the maximum amount of information. I show that there is no difference in terms of outcome between delegation and retainment of the decision-making authority for either player in the most informative equilibria. Conversely, in the partial pooling equilibria, it is advantageous for the principal to retain her decision-making authority. Additionally, my results show information acquisition and communication to be supplements. In the most informative equilibrium, the principal acquires relatively little information, which allows for greater information transmission between the players, whereas information transmission in the partial pooling equilibrium is much more limited. This causes the latter equilibrium to be significantly less attractive for both players.