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Delegation and Value Creation

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Author Info

  • Gerald Eisenkopf

    ()
    (Department of Economics, University of Konstanz, Germany)

  • Stephan Nüesch

    ()
    (Business Economics - Corporate Governance - Personnel Economics, University of Zurich, Switzerland)

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    Abstract

    Many scholars argue that the delegation of decision rights to independent institutions promotes trust and specific investments. We test this conjecture with variations of the trust game in which the back transfer decision is delegated to a third party. A randomly chosen third party with a fixed payment induces larger investments over time although the experimental design rules out reputation building. Changes in the third party’s selection procedure eliminate this benefit. If the third party gets a reward for the appointment, delegation actually destroys trust. Investors (unwarrantedly) fear a diffusion of responsibility and lower back transfers in this case.

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    File URL: http://www.wiwi.uni-konstanz.de/workingpaperseries/WP_13-Eisenkopf-Nueesch_2013.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, University of Konstanz in its series Working Paper Series of the Department of Economics, University of Konstanz with number 2013-13.

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    Length: 38 pages
    Date of creation: 20 Jun 2013
    Date of revision:
    Handle: RePEc:knz:dpteco:1313

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    Related research

    Keywords: Delegation; Trust; Third Party; Appointment procedures; Remuneration;

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    1. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    2. Björn Bartling & Urs Fischbacher, 2012. "Shifting the Blame: On Delegation and Responsibility," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 67-87.
    3. Santiago Sánchez-Pagés & Marc Vorsatz, 2009. "Enjoy the silence: an experiment on truth-telling," Experimental Economics, Springer, vol. 12(2), pages 220-241, June.
    4. Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," American Economic Review, American Economic Association, vol. 94(2), pages 362-366, May.
    5. Sanchez-Pages, Santiago & Vorsatz, Marc, 2007. "An experimental study of truth-telling in a sender-receiver game," Games and Economic Behavior, Elsevier, vol. 61(1), pages 86-112, October.
    6. Laurent Muller & Martin Sefton & Richard Steinberg & Lise Vesterlund, 2005. "Strategic Behavior and Learning in Repeated Voluntary-Contribution Experiments," Discussion Papers 2005-13, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    7. Lucas C. Coffman, 2011. "Intermediation Reduces Punishment (and Reward)," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 77-106, November.
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