Arbeitspapier
Authority and Incentives in Organizations
The paper analyzes how the choice of organizational structure leads to the best compromise between controlling behavior based on authority rights and minimizing costs for implementing high efforts. Concentrated delegation and hierarchical delegation turn out to be never an optimal compromise. If the CEO is more efficient than the division heads (i.e., the CEO's costs from exerting high effort are smaller than those of the division heads), the owner will prefer full delegation to the divisions to replace high incentive pay for motivating the division heads by incentives based on private benefits of control. In that situation, the importance of cooperative behavior between the firm's divisions determines whether decentralization or cross-authority delegation is the optimal form of full delegation. If, however, the division heads are more efficient than the CEO, then centralization or partial delegation can also be optimal.
- Language
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Englisch
- Bibliographic citation
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Series: Bonn Econ Discussion Papers ; No. 03/2013
- Classification
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Wirtschaft
Firm Behavior: Theory
Organizational Behavior; Transaction Costs; Property Rights
Economics of Contract: Theory
Firm Organization and Market Structure
- Subject
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authority
centralization
contracts
decentralization
moral hazard
- Event
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Geistige Schöpfung
- (who)
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Kräkel, Matthias
- Event
-
Veröffentlichung
- (who)
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University of Bonn, Bonn Graduate School of Economics (BGSE)
- (where)
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Bonn
- (when)
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2013
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kräkel, Matthias
- University of Bonn, Bonn Graduate School of Economics (BGSE)
Time of origin
- 2013
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