IDEAS home Printed from https://ideas.repec.org/a/ucp/jlawec/doi10.1086-718852.html

Organizations with Power-Hungry Agents

Author

Listed:
  • Wouter Dessein
  • Richard Holden

Abstract

We analyze a model of hierarchies in organizations in which neither decisions nor the delegation of decisions is contractible and in which power-hungry agents derive a private benefit from making decisions. Two distinct agency problems arise and interact: subordinates make more biased decisions (which favors adding more hierarchical layers), but uninformed superiors may fail to delegate (which favors removing layers). A designer may remove intermediate layers of the hierarchy (eliminate middle managers) or flatten an organization by removing top layers (eliminate top managers). We show that stronger preferences for power result in smaller, less-integrated hierarchies. Our key insight is that hoarding of decision rights is especially severe at the top of the hierarchy.

Suggested Citation

  • Wouter Dessein & Richard Holden, 2022. "Organizations with Power-Hungry Agents," Journal of Law and Economics, University of Chicago Press, vol. 65(S1), pages 263-291.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/718852
    DOI: 10.1086/718852
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/718852
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/718852
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/718852?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jana Freundt & Holger Herz, 2025. "A Cross-Country Study of Preferences for Choice Autonomy," CESifo Working Paper Series 12238, CESifo.
    2. De Chiara, Alessandro & Engl, Florian & Herz, Holger & Manna, Ester, 2022. "Control Aversion in Hierarchies," FSES Working Papers 527, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    3. Cameron Gordon, 2022. "The Information Bottleneck Principle in Corporate Hierarchies," Papers 2210.14861, arXiv.org.
    4. Pikulina, Elena S. & Tergiman, Chloe, 2020. "Preferences for power," Journal of Public Economics, Elsevier, vol. 185(C).
    5. Klockmann, Victor & von Schenk, Alicia & von Siemens, Ferdinand A., 2021. "Division of labor and the organization of knowledge in production: A laboratory experiment," Games and Economic Behavior, Elsevier, vol. 130(C), pages 196-210.
    6. Dell'Era, Michele, 2019. "Talking to Influence and the Consulting Paradox," MPRA Paper 93803, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:doi:10.1086/718852. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JLE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.