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The Allocation of Decision-Making Authority when Principal has Reputation Concerns

  • Tamada, Yasunari
  • Tsai, Tsung-Sheng

This paper analyzes the allocation of decision-making authority when the principal has reputation concerns. The principal can either keep the authority, or delegate it to the agent, who has better information. An outside evaluator who forms the principal's reputation cannot observe who makes the decision. The key feature of this paper is that the principal can in°uence her reputation through her delegation policy. With reputation concerns, we show that the principal tends to keep too much the authority from the evaluator's point of view, even though sometimes her information is not good enough for her to make the decision on her own.

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File URL: https://mpra.ub.uni-muenchen.de/20225/1/MPRA_paper_20225.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20225.

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Date of creation: Nov 2009
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Handle: RePEc:pra:mprapa:20225
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  1. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
  2. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Gilat Levy, 2004. "Anti-herding and strategic consultation," LSE Research Online Documents on Economics 541, London School of Economics and Political Science, LSE Library.
  4. Sean Gailmard, 2002. "Expertise, Subversion, and Bureaucratic Discretion," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(2), pages 536-555, October.
  5. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  6. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," American Economic Review, American Economic Association, vol. 97(1), pages 169-179, March.
  7. Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
  8. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part II: Multiple Policy Tasks," Levine's Working Paper Archive 321307000000000875, David K. Levine.
  9. Bengt Holmstrom & Joan Ricart i Costa, 1986. "Managerial Incentives and Capital Management," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 835-860.
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