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Optimal Dissent in Organizations

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Author Info
AUGUSTIN LANDIER
DAVID SRAER
DAVID THESMAR
Abstract

We model an organization as a two-agent hierarchy: an informed Decision Maker in charge of selecting projects and a (possibly) uninformed Implementer in charge of their execution. Both have intrinsic preferences over projects. This paper models the costs and benefits of divergence between their preferences, that is, dissent within the organization. Dissent is useful to (1) foster the use of objective (and sometimes private) information in decision making and (2) give credibility to the Decision Maker's choices. However, dissent comes at the cost of hurting the Implementer's intrinsic motivation, thereby impairing organizational efficiency. We show that dissent can be optimal, in particular, when information is useful and uncertainty is high. Moreover, dissent remains an optimal organizational form even when Implementers can choose their employer or when Decision Makers have real authority over hiring decisions. Copyright © 2009 The Review of Economic Studies Limited.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-937X.2009.00544.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 76 (2009)
Issue (Month): 2 (04)
Pages: 761-794
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Handle: RePEc:bla:restud:v:76:y:2009:i:2:p:761-794

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527

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This page was last updated on 2009-11-22.

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