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Delegating budgets when agents care about autonomy

  • Kuhn, Michael
  • Gundlach, Erich
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    We consider resource allocation within an organisation and show how delegation bears on moral hazard and adverse selection when agents have a preference for autonomy. Agents may care about autonomy for reasons of job-satisfaction, status or greater reputation when performing well under autonomy. Separating allocations (overall budget and degree of delegation) are characterised depending on the preference for autonomy. As the latter increases, the degree of delegation assigned to productive and unproductive agents converges. If agents' preferences for monetary rewards are weak, the principal will not employ financial transfers. Pooling then arises under a strong preference for autonomy.

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    Paper provided by University of Rostock, Institute of Economics in its series Thuenen-Series of Applied Economic Theory with number 69.

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    Date of creation: 2006
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    Handle: RePEc:zbw:roswps:69
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