The Allocation of Decision-Making Authority when Principal has Reputation Concerns
AbstractThis paper analyzes the allocation of decision-making authority when the principal has reputation concerns. The principal can either keep the authority, or delegate it to the agent, who has better information. An outside evaluator who forms the principal's reputation cannot observe who makes the decision. The key feature of this paper is that the principal can in°uence her reputation through her delegation policy. With reputation concerns, we show that the principal tends to keep too much the authority from the evaluator's point of view, even though sometimes her information is not good enough for her to make the decision on her own.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 20225.
Date of creation: Nov 2009
Date of revision:
Decision-making authority; delegation; reputation concerns;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-05 (All new papers)
- NEP-CDM-2010-02-05 (Collective Decision-Making)
- NEP-CTA-2010-02-05 (Contract Theory & Applications)
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