A theory of authority in bilateral contracting
Two players are involved in a joint project during which a decision must be reached. Each player has a private information about future profits. Authority gives to a player the right to decide first among a pre-defined set of alternatives. In this framework, I show that (partial) authority should be assigned to the player who gets the higher share of total surplus. This organizational structure performs as well as with a uniform benevolent third-party acting as a principal. Classification-JEL:; D23; D82; G32; L22
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