The Delegation Dilemma: Economies of Scale, Accountability, and Polycentric Governance

The paper examines how collective‑action systems balance decentralization and centralization through delegation. A reduced‑form model shows a scale–accountability tradeoff: larger constituencies lower individual costs but reduce a center’s incentive to retain each member, limiting non‑exploitative delegation to an endogenous size. Simulations with large language model agents reveal that polycentric governance structures naturally arise, cycling through concentration, exploitation, exit, and re‑formation, and that different model capacities vary in their willingness to lead and in their propensity to exploit.

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