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Centralized and Decentralized Decision Making in Organizations

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Author Info

  • Jan Zabojnik

    (University of Southern California and Queen's University)

Abstract

This article identifies a new type of cost associated with centralization. If workers are liquidity constrained, it may be less costly to motivate a worker who is allowed to work on his own idea than a worker who is forced to follow the manager's idea. Thus, it may be optimal to let workers decide on the method for doing their job even if managers have better information. This conclusion holds even if more general contracts are considered that are based on communication of information between the worker and the manager, as long as these general contracts are not entirely costless.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 20 (2002)
Issue (Month): 1 (January)
Pages: 1-22
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jlabec:v:20:y:2002:i:1:p:1-22

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Citations

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Cited by:
  1. Anthony M. Marino & Ján Zábojník, 2008. "Work-related perks, agency problems, and optimal incentive contracts," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 565-585.
  2. Waldman, Michael, 2007. "Theory and evidence in internal labor markets," MPRA Paper 5113, University Library of Munich, Germany.
  3. Ján Zábojník, 0. "Disobedience and Authority," Journal of Law, Economics and Organization, Oxford University Press, vol. 26(3), pages 427-459.
  4. Czarnitzki, Dirk & Kraft, Kornelius, 2007. "Mitarbeiteranreizsysteme und Innovationserfolg," ZEW Discussion Papers 07-075, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Kameliia Petrova, 2005. "Does Motivation Trigger Autonomy, or Vice Versa?," Game Theory and Information 0510004, EconWPA, revised 13 Oct 2005.
  6. Hans K. Hvide & Todd Kaplan, 2003. "A Theory of Capital Structure with Strategic Defaults and Priority Violations," Microeconomics 0311001, EconWPA.
  7. Lukas ANGST & Karol Jan BOROWIECKI, 2011. "Delegation and Motivation," Trinity Economics Papers tep1611, Trinity College Dublin, Department of Economics.
  8. Maria De Paola & Vincenzo Scoppa, 2009. "Task assignment, incentives and technological factors," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 43-55.
  9. Marcoul, Philippe, 2003. "A Theory of Advice Based on Information Search Incentives," Staff General Research Papers 10357, Iowa State University, Department of Economics.
  10. Robert S. Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Levine's Working Paper Archive 661465000000000249, David K. Levine.

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