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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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Bibliographic Info

Paper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 200303.

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Date of creation: 2003
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Handle: RePEc:gbl:wpaper:200303

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Keywords: CONTRACT; ASYMMETRIC INFORMATION; CONTROL RIGHTS; LIMITED LIABILITY; HIDDEN INFORMATION;

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  1. Krähmer, Daniel, 2002. "Delegation versus authority," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-26, Social Science Research Center Berlin (WZB).
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  5. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
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  11. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
  12. 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.
  13. Poitevin, M., 2000. "Can the Theory of Incentives Explain Devcentralization?," Cahiers de recherche 2000-13, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  16. Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
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