Doing Well by doing good - or doing better by delegating?

Abstract

Machiavelli advises against delegating the distribution of favors. We test this claim in an experiment, in which an investor can directly transfer money to a trustee or delegate this decision to another investor. Varying the value of the transfers of the investor and the delegate, we find that the trustee’s rewards follow a rather simple pattern. In all situations, both investors are rewarded, but the person who actually decides gets a higher reward. Delegation only pays off for the initial decision maker if the value of the delegate’s transfer is much higher than the value of the investor’s transfer.Delegation, trusts, reciprocity, intentions, experiment