As part of our ongoing research into capital budgeting processes as respons
es to decentralized information and incentive problems, we focus in this pa
per on when a level of a managerial hierarchy will delegate the allocation
of capital across projects and time to the level below it. In our model, de
legation is a way to save on costly investigation of proposed projects. The
refore, it is more extensive the larger are the costs of such investigation
s. This delegation takes advantage of the fact that the lower-level manager
's preferences are assumed to be similar (though not identical) to those of
the higher level. (C) 1998 Elsevier Science S.A. All rights reserved. JEL
classification: G31.