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Allocation of Authority when a Person is not a Robot


  • Li, Jianpei
  • Wu, Yanhui


We formalize a conception of authority, which is commonly defined as the right of controlling a person’s actions embedded in human assets in sociology. Due to the inalienable property of human assets, the contractible formal authority is hard to verify and enforce, while real authority usually diverges from formal authority. Inefficiency tends to arise when a task is not routine or can not be done by a robot. Using a framework of incomplete contract, we show that allocation of formal authority, as an instrument to mitigate the inefficiency, is determined by features of tasks and specificity of assets, and the relationship between the resources. Monitoring is then introduced to fine tune value of delegation.

Suggested Citation

  • Li, Jianpei & Wu, Yanhui, 2007. "Allocation of Authority when a Person is not a Robot," Discussion Papers in Economics 1995, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:1995

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    More about this item


    Transaction of human assets; Real Authority; Formal Authority; Delegation; Monitor;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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