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Delegation and Organizational Design

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  • Axel GAUTIER

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Dimitri PAOLINI

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

This paper concentrates on the question of organizational design under asymmetric information. The design of the organization has two parts: first, communication channels between the members should be established and second, the tasks should be allocated to the party that performs it in the most efficient way. We show that if the decisions are delegated to the agents, the agent's decisions reveal the information they have to the principal. Delegation is then a mechanism to transfer information. Given that delegation is costly, the principal should decide how many decisions she delegates. In this paper, we show that delegation is only partial. The agents do not receive power over all decisions and some agents may receive power will the other will not even if they are identical.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2001026.

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Length: 21
Date of creation: 01 Sep 2001
Date of revision:
Handle: RePEc:ctl:louvir:2001026

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Keywords: Delagation; Hierarchy; Assymmetric information;

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  1. Bolton, Patrick & Dewatripont, Mathias, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 809-39, November.
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  7. Alan Schwartz, 1997. "Incomplete Contracts," Yale School of Management Working Papers ysm73, Yale School of Management.
  8. Riordan, Michael H & Sappington, David E M, 1987. "Information, Incentives, and Organizational Mode," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 243-63, May.
  9. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May.
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  11. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
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  13. Armstrong, Mark, 1995. "Delegation and discretion," MPRA Paper 17069, University Library of Munich, Germany.
  14. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
  15. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1057-90, November.
  16. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
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