Awareness and Control Decentralization: Stochastic Case

The problem of decision-making under risk is considered. It is assumed that the operating party (also called the Principal) can process only a limited amount of information about an uncertain factor and reckons upon the expected value of his payoff. Two control modes are compared. In the first mode, decision-making is centralized. In the second, the operating party delegates some of his decision authority to several agents. It is assumed that the operating party knows the interests of agents and relies on their rational behavior; in all other respects, the operating party is cautious about the uncertainty of their choice.