A principal can either legally make a decision herself (P-formal authority) or can decide to assign the formal right to make a decision to her subordinate (delegation). In each case the party that has the formal right to decide can make a decision on a new project. If that party is uninformed they will defer the decision to the other party who will decide if they are informed. The principal’s effort level of finding a new project is denoted by E; e denotes the subordinate’s effort level. E and e represent the probability that both the principal and the agent discover a new project. The following table provides the effort levels of both parties under P-formal authority and delegation. P-formal authority Delegation Principal E = 0.8 E = 0.4 Agent e = 0.5 e = 0.8 If the principal’s preferred project is chosen, the principal gets a revenue/benefit of $100. Finally, the probability that the agent’s preferred project is also preferred by the principal is a = 0.8. What is the principal’s expected benefit (not including effort costs) with P-formal authority? Answer with a number only (no words or symbols such as $ signs).

[25 marks] (Aghion and Tirole’s model of delegation) CEO Alice needs to choose among four projects. She hiresBob to recommend a project to her. The four projects are of three types, A, B, and D. One project is of type A,one project is of type B and two projects are of type D. Both Alice’s and Bob’s payoffs depend on the types of theproject implemented, as summarized in the following table. The payoffs are “utility indices” whose expectation iswhat players try to maximize.Throughout the question, we assume that Alice cannot observe the types of the four projects: the four projects lookidentical to her. The timing is as follows.(1) Bob recommends a project based on his knowledge.Project type Alice’s payoff Bob’s payoffA 10 6B 6 10D -100 -1001(2) Alice chooses among three options: implementing the project recommended by Bob, implementing a randomlychosen project not recommended by Bob, and doing nothing. Doing nothing gives both players zero payoff.(a) [5 marks] First, assume that Bob knows nothing more than Alice. Therefore, he randomly recommends aproject, which is of types A with probability 1/4, B with probability 1/4, and D with probability 1/2. Determinewhat Alice should do in this case.(b) [15 marks] Now assume that Bob knows the types of the four projects. We model the interaction betweenAlice and Bob as a strategic form game. Bob chooses which project to recommend (A, B or D) and Alicechooses among C (accepting the recommendation), R (rejecting the recommendation and choosing randomlybetween the remaining three projects) and N (doing nothing). Write down the payoff matrix of the game andfind all Nash equilibria (in pure strategy). (Hint: first, figure out the probabilities that Alice’s randomly chosenproject is of type A, B and D if she rejects Bob’s recommendation.)(c) [5 marks] Discuss why hiring Bob (whose salary is negligible compared with project payoffs) may help Aliceeven though their interests are not perfectly aligned. (Limited to 50 words.

A(n) __________ leader delegates authority and involves employees in the decision-making process.ANSWERlaissez-faireautocraticdemocraticvisionaryI DON'T KNOW YET

Which of the following refers to the council that helps project managers make and approve strategic decisions that affect both the company and the project?1 pointSteering committeeChief Executive OfficerOffice of legal affairsStakeholder

What title best describes the role of the project manager in the group decision making process?Multiple choice question.Ultimate authorityFacilitatorTie-breaker

Who of the following provides approval for a project?The project managerIndividuals with sign-off authorityKey decision makersAll stakeholders