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Delegation and Organizational Design

  • 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))

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.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2001026.

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Length: 21
Date of creation: 01 Sep 2001
Date of revision:
Handle: RePEc:ctl:louvir:2001026
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  1. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
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  9. Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Laffont & Martimort, 1997. "Collusion under asymmetric information," Working Papers 152574, Institut National de la Recherche Agronomique, France.
  11. Laffont, J.-J., 1999. "Political Economy, Information and Incentives," Papers 99.516, Toulouse - GREMAQ.
  12. Riordan, Michael H & Sappington, David E M, 1987. "Information, Incentives, and Organizational Mode," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 243-63, May.
  13. Mathias Dewatripont & Patrick Bolton, 1996. "The firm as a communication network," ULB Institutional Repository 2013/9597, ULB -- Universite Libre de Bruxelles.
  14. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1057-90, November.
  15. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  16. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May.
  17. Melumad, Nahum & Mookherjee, Dilip & Reichelstein, Stefan, 1992. "A theory of responsibility centers," Journal of Accounting and Economics, Elsevier, vol. 15(4), pages 445-484, December.
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