Decentralization and Collusion
We consider a model where agents work in sequence on a project, share information not available to the principal, and can collude. Due to limited liability the Coase theormem does not apply. The distribution of surplus among the agents is there an important control variable for the principal, which gives us a theory of how to delegate in an organization subject to moral hazard. The optimal distribution of surplus can always be achieved by delegating in the right way (decentralization) without using "message games" (centralization).
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|Date of creation:||1996|
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Web page: http://www.economics.harvard.edu/journals/hier
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"Budgeting and Hierarchical Control,"
71, Boston University - Industry Studies Programme.
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"Decentralization and Collusion,"
Harvard Institute of Economic Research Working Papers
1757, Harvard - Institute of Economic Research.
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728, California Institute of Technology, Division of the Humanities and Social Sciences.
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- Dilip Mookherjee, 1984. "Optimal Incentive Schemes with Many Agents," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 433-446.
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- Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
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