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I am grateful to G. Nancy for guidance and discussions. I would like to thank R. Lagunoff and P. Michel for their comments and technical review. A. Bhatia, A. Feltenstein, A. Mourmouras, S. Nsouli, and participants at an IMF Institute seminar provided many useful suggestions. Errors are solely mine.
The game rules out negative payoffs.
For an analysis of different factors leading a principal to be overruled by her subordinate, see Aghion and Tirole (1997).
Delegation is defined solely as the allocation of autority over the choice of the project to the agent.
For the sake of simplicity, we describe the decisions of the players in a sequential manner, but, actually, they play simultaneously.
This technical assumption indicates that the players have unlimited access to training.
We define trust as the closeness of preferences