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Delegation of Authority as an Optimal (In)Complete Contract Author info | Abstract | Publisher info | Download info | Related research | Statistics Andreas Roider
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This paper contributes to the literature on the foundations of incomplete contracts. In a holdup framework, we provide two sets of conditions under which simple delegation of authority is the solution to the complete-contracting problem. In cases where overinvestment can be ruled out, delegation is optimal if the payoffs of the parties satisfy certain separability conditions. If overinvestment might be an issue, delegation (possibly with restricted competencies) is optimal if additionally some continuity requirements are met. The paper also contributes to the literature on delegation, where such replication results have previously been derived in settings with asymmetric information.
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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics .
Volume (Year): 162 (2006)
Issue (Month): 3 (September)
Pages: 391-411
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200609)162:3_391:doaaao_2.0.tx_2-nContact details of provider: Web page: http://www.mohr.de/jite
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Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
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