Decentralization and Collusion
AbstractWe consider a model where agents work in sequence on a project, share information not available to the principal, and can collude. Due to limited liability the Coase theormem does not apply. The distribution of surplus among the agents is there an important control variable for the principal, which gives us a theory of how to delegate in an organization subject to moral hazard. The optimal distribution of surplus can always be achieved by delegating in the right way (decentralization) without using "message games" (centralization).
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Bibliographic InfoPaper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1757.
Date of creation: 1996
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