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Can the Theory of Incentives Explain Decentralization?

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  • Michel Poitevin

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Abstract

This survey presents within a single model three theories of decentralization of decision-making within organizations based on private information and incentives. Renegotiation, collusion, and limits on communication are three sufficient conditions for decentralization to be optimal. Cet article présente dans un cadre unifié un survol de trois théories de la décentralisation de la prise de décision dans les organisations. Ces théories reposent sur la présence d'information privée et des incitations qui en découlent. La renégociation, la collusion et les limites à la communication représentent trois conditions suffisantes pouvant expliquer l'optimalité de la décentralisation.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2000s-32.

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Date of creation: 01 Sep 2000
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Handle: RePEc:cir:cirwor:2000s-32

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Keywords: Organizational design; private information; decentralization; Design organisationnel; information privée; décentralisation;

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References

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  1. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  2. Marcel Boyer, 1999. "Les Expos, l'OSM, les universités, les hôpitaux : Le coût d'un déficit de 400 000 emplois au Québec = Expos, Montreal Symphony Orchestra, Universities, Hospitals: The Cost of a 400,000-Job Shortf," CIRANO Papers 99c-01, CIRANO.
  3. Benoit A. Aubert & Michel Patry & Suzanne Rivard & Heather Smith, 2000. "IT Outsourcing Risk Management at British Petroleum," CIRANO Working Papers 2000s-31, CIRANO.
  4. Mookherjee, Dilip & Reichelstein, Stefan, 1992. "Dominant strategy implementation of Bayesian incentive compatible allocation rules," Journal of Economic Theory, Elsevier, vol. 56(2), pages 378-399, April.
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Cited by:
  1. Roider, Andreas, 2007. "Risk, Delegation, and Project Scope," IZA Discussion Papers 3117, Institute for the Study of Labor (IZA).
  2. Dongsoo Shin & Roland Strausz, 2014. "Delegation and Dynamic Incentives," CESifo Working Paper Series 4774, CESifo Group Munich.
  3. Stefan Ambec, 2003. "A Theory of Authority in Bilateral Contracting," CSEF Working Papers 102, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  4. Jelovac, I. & Macho-Stadler, I., 1998. "Comparing Organizational Structures in Health Services," UFAE and IAE Working Papers 412.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  5. AMBEC Stefan & POITEVIN Michel, 2008. "Marketing vs Engineering: Who Should Decide ?," LERNA Working Papers 08.22.266, LERNA, University of Toulouse.
  6. Jonathan Treussard, 2005. "Life-Cycle Consumption Plans and Portfolio Policies in a Heath-Jarrow-Morton Economy," Boston University - Department of Economics - Working Papers Series WP2005-033, Boston University - Department of Economics.
  7. Joan Canton & Stephane De Cara & Pierre-Alain Jayet, 2009. "Agri-environmental schemes: Adverse selection, information structure and delegation," Working Papers 31130, Institut National de la Recherche Agronomique, France.
  8. Theilen, Bernd, 2009. "Decentralization and the Gains from Monitoring," Working Papers 2072/42863, Universitat Rovira i Virgili, Department of Economics.
  9. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 367-390, June.
  10. Andreas Roider, 2009. "Delegation, Risk, and Project Scope," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(2), pages 193-209, June.
  11. GRECO, Luciano, 2003. "Optimal grants under asymmetric information: federalism versus devolution," CORE Discussion Papers 2003024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Timothy Van Zandt, 2008. "The Interplay Between Incentives and Communication Complexity in Mechanism Design," 2008 Meeting Papers 480, Society for Economic Dynamics.
  13. Pérez, Jessica Helen & Iranzo Sancho, Susana, 2012. "Determinants of Decentralization within the Firm: Some Empirical Evidence from Spanish Small and Medium- Sized Enterprise," Working Papers 2072/211755, Universitat Rovira i Virgili, Department of Economics.

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