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Explicit and Latent Authority in Hierarchical Organizations

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Author Info
Rene van den Brink
Robert P. Gilles

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Abstract

In this paper we consider the problem of the control of access to a firm's productive asset, embedding the relevant decision makers into a general structure of formal authority relations. Within such an authority structure, each decision maker acts as a principal to some decision makers, while she acts as an agent in relation to certain other decision makers. We study under which conditions decision makers decide to exercise their own authority and to accept their superiors' authority. We distinguish two types of behavior within such an authority situation. First, we investigate a non-cooperative equilibrium concept describing the explicit, myopic exercise of authority. We find that if monitoring costs are sufficiently small, such explicit authority is exercised fully. Second, we consider the possibility of subordinates to submit themselves to authority even though such authority is not enforced explicitly. Again for sufficiently small monitoring costs such latent authority can be supported as an equilibrium

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 393.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:393

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Related research
Keywords: Theory of the firm; exercise of authority;

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Find related papers by JEL classification:
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gilles, R.P. & Sarangi, S., 2004. "Social network formation with consent," Discussion Paper 70, Tilburg University, Center for Economic Research. [Downloadable!]
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