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Delegation and Organizational Design

Author

Listed:
  • Axel GAUTIER

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Dimitri PAOLINI

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

This paper concentrates on the question of organizational design under asymmetric information. The design of the organization has two parts: first, communication channels between the members should be established and second, the tasks should be allocated to the party that performs it in the most efficient way. We show that if the decisions are delegated to the agents, the agent's decisions reveal the information they have to the principal. Delegation is then a mechanism to transfer information. Given that delegation is costly, the principal should decide how many decisions she delegates. In this paper, we show that delegation is only partial. The agents do not receive power over all decisions and some agents may receive power will the other will not even if they are identical.

Suggested Citation

  • Axel GAUTIER & Dimitri PAOLINI, 2001. "Delegation and Organizational Design," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2001026
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2001-26.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Delagation; Hierarchy; Assymmetric information;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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