The Allocation of Authority in a Joint Project under Limited Liability
Authority is modeled as the right to undertake a noncontractible decision in a joint project. The decision-maker is assumed to exert an externality on the other parties; overall surplus is shared according to generalized Nash bargaining. Under limited liability, the agent whose marginal costs increase faster receives authority if the agents' cost functions are very different. If the agents have similar marginal cost functions, bargaining power determines the allocation of authority. Possible applications include the introduction of a new product.
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Volume (Year): 163 (2007)
Issue (Month): 3 (September)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Patrick W. Schmitz, 2005.
"Allocating control in agency problems with limited liability and sequential hidden actions,"
Bonn Econ Discussion Papers
bgse27_2005, University of Bonn, Germany.
- Patrick W. Schmitz, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 318-336, Summer.
- Schmitz, Patrick W, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," CEPR Discussion Papers 5145, C.E.P.R. Discussion Papers.
- Pitchford, Rohan, 1998. "Moral hazard and limited liability: The real effects of contract bargaining," Economics Letters, Elsevier, vol. 61(2), pages 251-259, November.
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