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Random Authority

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  • Siguang Li
  • Xi Weng

Abstract

This article rationalizes matrix management in a multiproject organization in which decisions must be adapted to local conditions but also coordinated with each other. Project managers are privately informed about local conditions and communicate strategically via cheap talk. Matrix management is modeled as a randomization over deterministic authority allocations. We show that random authority is strictly optimal when the conflict between adaptation and coordination is very severe or the coordination need is very small. Moreover, the optimal degree of delegation changes nonmonotonically in the coordination need when the incentives of the project managers are sufficiently aligned.

Suggested Citation

  • Siguang Li & Xi Weng, 2017. "Random Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(1), pages 211-235, February.
    • Handle: RePEc:wly:iecrev:v:58:y:2017:i:1:p:211-235
    DOI: 10.1111/iere.12214
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    References listed on IDEAS

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