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Management Style in Decision Making: Top Down or Bottom Up?

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Author Info
Will, Heide C. U.
Abstract

This paper analyses management style as a governance mechanism in agency relationships when the lack of verifiable information restricts the contracting possibilities. Specifically, it investigates whether decision making should be supplemented by prior verification, and how these tasks should be organized, i.e. whether they should be delegated to an informed expert or not. The optimal organization design is shown to depend nonmonotonically on the divergence of objectives and the efficiency of available information technologies. Moreover, this paper demonstrates how the nature of the expert's technological advantage influences the underlying tradeoffs.

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File URL: ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonsfa/bonsfa577.pdf
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Publisher Info
Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 577.

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Date of creation: Jul 1998
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Handle: RePEc:bon:bonsfa:577

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Web page: http://www.bgse.uni-bonn.de/index.php?id=517

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Related research
Keywords: governance structure centralization delegation

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  2. Strausz, Roland, 1997. "Delegation of Monitoring in a Principal-Agent Relationship," Review of Economic Studies, Blackwell Publishing, vol. 64(3), pages 337-57, July. [Downloadable!] (restricted)
    Other versions:
  3. AGHION, Philippe & TIROLE, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
    Other versions:
  4. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Itoh, Hideshi, 1994. "Job design, delegation and cooperation: A principal-agent analysis," European Economic Review, Elsevier, vol. 38(3-4), pages 691-700, April. [Downloadable!] (restricted)
  6. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
    Other versions:
  7. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  8. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
    Other versions:
  9. Trond E. Olsen, 1996. "Agency Costs and the Limits of Integration," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 479-501, Autumn. [Downloadable!] (restricted)
  10. Nahum D. Melumad & Dilip Mookherjee & Stefan Reichelstein, 1995. "Hierarchical Decentralization of Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 654-672, Winter. [Downloadable!] (restricted)
  11. Villadsen, Bente, 1995. "Communication and delegation in collusive agencies," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 315-344, April. [Downloadable!] (restricted)
  12. Qian, Yingyi, 1994. "Incentives and Loss of Control in an Optimal Hierarchy," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 527-44, July. [Downloadable!] (restricted)
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