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Informational control and organizational design

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  • Ivanov, Maxim

Abstract

This paper focuses on issues of allocating authority between an uninformed principal and an informed expert. We analyze the benefits of informational control--restricting the precision of the expert's information (without learning its content). In this case, the result of Dessein (2002) [8] that delegating decisions to a perfectly informed expert is better than communication when preferences between the expert and the principal are not too far apart is reversed. We demonstrate that these organizational forms--informational control and delegation--can be either complements or substitutes, depending on the principal's ability to affect the expert's discretion about the set of allowed policies.

Suggested Citation

  • Ivanov, Maxim, 2010. "Informational control and organizational design," Journal of Economic Theory, Elsevier, vol. 145(2), pages 721-751, March.
    • Handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:721-751
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