A Theory of Claim Resolution

Abstract

We study claim resolution. A claim consists of a global fact observed by the principal and the agent and a local fact the agent alone observes. The agent resolves the claim; the principal decides whether the agent is more likely wrong or right. The principal and agent can disagree about the weight to accord each fact or the overall evidence threshold.

We characterize how the equilibrium varies with the nature of disagreement. Despite lacking commitment power, we find that the principal grants the agent decision-making authority over an interval of global facts. Further, we find that the principal can better motivate an agent who excessively weights the local fact than an agent who excessively weights the global fact. The principal strictly prefers the former to the latter, even though each would make the same number of errors if granted complete autonomy. Applications to courts, administrative agencies, and committees are considered.