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Authority versus Persuasion

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  • Eric Van den Steen

Abstract

This paper studies a principal's trade-off between using persuasion versus using interpersonal authority to get the agent to 'do the right thing' from the principal's perspective (when the principal and agent openly disagree on the right course of action). It shows that persuasion and authority are complements at low levels of effectiveness but substitutes at high levels. Furthermore, the principal will rely more on persuasion when agent motivation is more important for the execution of the project, when the agent has strong intrinsic or extrinsic incentives, and, for a wide range of settings, when the principal is more confident about the right course of action.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.2.448
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 2 (May)
Pages: 448-53

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:2:p:448-53

Note: DOI: 10.1257/aer.99.2.448
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References

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  1. Eric Van den Steen, 2010. "Interpersonal Authority in a Theory of the Firm," American Economic Review, American Economic Association, vol. 100(1), pages 466-90, March.
  2. Paul R. Milgrom & John Roberts, 1985. "Relying on the Information of Interested Parties," Cowles Foundation Discussion Papers 749, Cowles Foundation for Research in Economics, Yale University.
  3. Yeon-Koo Che & Navin Karthik, 2007. "Opinions as incentives," Discussion Papers 0708-09, Columbia University, Department of Economics.
  4. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  6. Morris, Stephen, 1995. "The Common Prior Assumption in Economic Theory," Economics and Philosophy, Cambridge University Press, vol. 11(02), pages 227-253, October.
  7. Susan Athey & John Roberts, 2001. "Organizational Design: Decision Rights and Incentive Contracts," American Economic Review, American Economic Association, vol. 91(2), pages 200-205, May.
  8. Van den Steen, Eric, 2007. "The Limits of Authority: Motivation versus Coordination," Working papers 37305, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  9. Dessein, Wouter & Garicano, Luis & Gertner, Robert, 2007. "Organizing for Synergies," CEPR Discussion Papers 6019, C.E.P.R. Discussion Papers.
  10. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
  11. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
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Cited by:
  1. Brice Corgnet & Roberto Hernán-González & Stephen Rassenti, 2011. "Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations," Working Papers 11-05, Chapman University, Economic Science Institute.
  2. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.

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