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Delegation, monitoring, and relational contracts

Author

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  • Goldlücke, Susanne
  • Kranz, Sebastian

Abstract

This paper analyzes in a relational contracting framework when a principal should fully delegate a task to a team of hired workers or only partially delegate the task and work herself in the team. It is shown that full delegation is more likely to be optimal under a less efficient monitoring technology, lower generated surplus, lower complementarity of efforts, or a larger team of workers.

Suggested Citation

  • Goldlücke, Susanne & Kranz, Sebastian, 2012. "Delegation, monitoring, and relational contracts," Economics Letters, Elsevier, vol. 117(2), pages 405-407.
  • Handle: RePEc:eee:ecolet:v:117:y:2012:i:2:p:405-407 DOI: 10.1016/j.econlet.2012.06.019
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    References listed on IDEAS

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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Anja Schöttner, 2008. "Relational Contracts, Multitasking, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 24(1), pages 138-162, May.
    3. Katherine Doornik, 2006. "Relational Contracting in Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 517-548, June.
    4. Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June.
    5. Goldlücke, Susanne & Kranz, Sebastian, 2012. "Infinitely repeated games with public monitoring and monetary transfers," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1191-1221.
    6. Luis Rayo, 2007. "Relational Incentives and Moral Hazard in Teams," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 937-963.
    7. Itoh, Hideshi, 1994. "Job design, delegation and cooperation: A principal-agent analysis," European Economic Review, Elsevier, vol. 38(3-4), pages 691-700, April.
    8. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    9. Li, Sanxi & Ye, Bing & Yu, Jianyu, 2012. "Observability and incentive in organizations," Economics Letters, Elsevier, vol. 114(2), pages 205-207.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Relational contracts; Delegation; Monitoring; Job design; Moral hazard in teams;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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