Externalities and the Allocation of Decision Rights in the Theory of the Firm

Arbeitspapier

This paper views authority as the right to undertake decisions that have external effects on other members of the organization. Because of contractual incompleteness, monetary incentives are insufficient to internalize these effects in the decision maker's objective. The optimal assignment of decision rights minimizes the resulting inefficiencies. We illustrate this in a principal-agent model where the principal retains the authority to select '€˜large' projects but delegates the decision right to the agent to implement '€˜small' projects. Extensions of the model discuss the role of effort incentives, asymmetric information and multistage decisions.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SFB/TR 15 Discussion Paper ; No. 23

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; Asymmetric and Private Information; Mechanism Design ; Firm Organization and Market Structure
• Thema: Authority ; Control Rights ; Decision Rights ; Delegation ; Externalities ; Incomplete Contracts ; Theory of the Firm

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bester, Helmut
• Ereignis: Veröffentlichung
• (wer): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (wo): München
• (wann): 2004

Weitere Informationen

• DOI: doi:10.5282/ubm/epub.13525
• Handle: http://hdl.handle.net/10419/93831
• URN: urn:nbn:de:bvb:19-epub-13525-5
• Letzte Aktualisierung: 10.03.2025, 11:47 MEZ