Delegating budgets when agents care about autonomy

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Delegating budgets when agents care about autonomy

Author Info

Michael Kuhn () (University of Rostock, Department of Economics and Social Sciences, and MPIDR)

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Michael Kuhn

Abstract

We consider resource allocation within an organisation and show how delegation bears on moral hazard and adverse selection when agents have a preference for autonomy. Agents may care about autonomy for reasons of job-satisfaction, status or greater reputation when performing well under autonomy. Separating allocations (overall budget and degree of delegation) are characterised depending on the preference for autonomy. As the latter increases, the degree of delegation assigned to productive and unproductive agents converges. If agents' preferences for monetary rewards are weak, the principal will not employ financial transfers. Pooling then arises under a strong preference for autonomy.

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Publisher Info
Paper provided by University of Rostock, Institute of Economics, Germany in its series Thuenen-Series of Applied Economic Theory with number 69.

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Length: 37 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:ros:wpaper:69

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Paper
- Michael Kuhn, . "Delegating Budgets when Agents Care About Autonomy," Discussion Papers 04/10, Department of Economics, University of York. [Downloadable!]

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-01-28 (All new papers)
NEP-BEC-2007-01-28 (Business Economics)
NEP-CFN-2007-01-28 (Corporate Finance)

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