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A theory of authority in bilateral contracting

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  • Ambec, S.

Abstract

Two players are involved in a joint project during which a decision must be reached. Each player has a private information about future profits. Authority gives to a player the right to decide first among a pre-defined set of alternatives. In this framework, I show that (partial) authority should be assigned to the player who gets the higher share of total surplus. This organizational structure performs as well as with a uniform benevolent third-party acting as a principal. Classification-JEL:; D23; D82; G32; L22

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  • Ambec, S., 2003. "A theory of authority in bilateral contracting," Working Papers 200303, Grenoble Applied Economics Laboratory (GAEL).
    • Handle: RePEc:gbl:wpaper:200303
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    References listed on IDEAS

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    More about this item

    Keywords

    CONTRACT; ASYMMETRIC INFORMATION; CONTROL RIGHTS; LIMITED LIABILITY; HIDDEN INFORMATION;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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