Impact of agent’s information advantage on the efficiency and quality of Contracting out: Focus on goal conflict and task characteristics

We analyze the impact of the information advantage of the agent on the performance of contracting out. Unlike in the general principal-agent theory, an agent’s information advantage varies by the level of goal conflict and the type of delegated task in a bureaucratic setting. Our empirical analysis shows that agents facing high levels of goal conflict and possessing limited information advantages exhibit lower performance. Additionally, vague and complex tasks reduce agents’ information advantage. To increase agents’ information advantage and reduce related transaction costs, it is necessary to delegate the right type of task to the right type of agent. The goal of contracting out should also be set appropriately.