On Delegation under Relational Contracts

Oliver Gürtler

International Journal of the Economics of Business, 2008, vol. 15, issue 1, pages 85-98

Abstract: In this paper, a principal's decision between delegating two tasks or handling one of the two tasks herself is analyzed. We assume that there exists no objective performance measure so that the principal must solely rely on relational contracts (informal agreements sustained by the value of future relationships) as an incentive device. It is found that the principal can commit herself to honor the relational contract more effectively if she delegates one task only. This kind of job design is therefore optimal unless the available performance information is rather inaccurate and the discount rate is very low.

Keywords: Job Design; Relational Contracts; Partial Delegation; Complete Delegation (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:taf:ijecbs:v:15:y:2008:i:1:p:85-98

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