Overconfidence and Managers' Responsibility Hoarding

Arbeitspapier

Overconfidence is a well-established behavioral phenomenon that involves an overestimation of own capabilities. We introduce a model, in which managers and agents exert effort in a joint production, after the manager decides on the allocation of the tasks. A rational manager tends to delegate the critical task to the agent more often than given by the efficient task allocation. In contrast, an overconfident manager is more likely to hoard responsibility, i.e. to delegate the critical task less often than a rational manager. In fact, a manager with a sufficiently high ability and a moderate degree of overconfidence increases the total welfare by hoarding responsibility and exerting more effort than a rational manager. Finally, we derive the conditions under which responsibility hoarding can persist in an organization, showing that the bias survives as long as the overconfident manager can rationalize the observed output by underestimating the ability of the agent.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 368

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Asymmetric and Private Information; Mechanism Design ; Personnel Management; Executives; Executive Compensation ; Personnel Economics: Labor Management
• Subject: organizational behavior ; management performance ; bounded rationality ; behavioral bias ; Kooperative Führung ; Führungskräfte ; Persönlichkeitspsychologie ; Prinzipal-Agent-Theorie ; Beschränkte Rationalität

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nieken, Petra ; Sadrieh, Abdolkarim ; Zhou, Nannan
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2011

Further information

• DOI: doi:10.5282/ubm/epub.13186
• Handle: http://hdl.handle.net/10419/94155
• URN: urn:nbn:de:bvb:19-epub-13186-2
• Last update: 10.03.2025, 11:42 AM CET