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Monitoring your Friends, not your Foes: Strategic Ignorance and the Delegation of Real Authority

Author

Listed:
  • Silvia Dominguez Martinez

    (University of Amsterdam)

  • Randolph Sloof

    (University of Amsterdam)

  • Ferdinand von Siemens

    (University of Amsterdam, and CESifo)

Abstract

This discussion paper resulted in an article in 'Games and Economic Behavior' (2014). Volume 85, pages 289-305. In this laboratory experiment we study the use of strategic ignorance to delegate real authority within a firm. A worker can gather information on investment projects, while a manager makes the implementation decision. The manager can monitor the worker. This allows her to better exploit the information gathered by the worker, but also reduces the worker's incentives to gather information in the first place. Both effects of monitoring are influenced by the interest alignment between manager and worker. Our data confirms the theoretical predictions that optimal monitoring depends non-monotonically on the level of interest alignment. We also find evidence for hidden costs of control and preferences for control, but these have no substantial effects on organizational outcomes.

Suggested Citation

  • Silvia Dominguez Martinez & Randolph Sloof & Ferdinand von Siemens, 2010. "Monitoring your Friends, not your Foes: Strategic Ignorance and the Delegation of Real Authority," Tinbergen Institute Discussion Papers 10-101/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20100101
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    2. Grossman, Zachary & van der Weele, Joël, 2013. "Self-Image and Strategic Ignorance in Moral Dilemmas," University of California at Santa Barbara, Economics Working Paper Series qt0bp6z29t, Department of Economics, UC Santa Barbara.
    3. von Siemens, Ferdinand A., 2013. "Intention-based reciprocity and the hidden costs of control," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 55-65.
    4. Lai, Ernest K. & Lim, Wooyoung, 2012. "Authority and communication in the laboratory," Games and Economic Behavior, Elsevier, vol. 74(2), pages 541-560.

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    More about this item

    Keywords

    Delegation; Real Authority; Strategic Ignorance;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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