Delegation and Value Creation
AbstractMany 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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Bibliographic InfoPaper 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.
Length: 38 pages
Date of creation: 20 Jun 2013
Date of revision:
Find related papers by JEL classification:
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-15 (All new papers)
- NEP-EXP-2013-07-15 (Experimental Economics)
- NEP-SOC-2013-07-15 (Social Norms & Social Capital)
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