Delegation of Authority as an Optimal (In)complete Contract

Andreas Roider ()

Bonn Econ Discussion Papers from University of Bonn, Germany

Abstract: The present paper aims to contribute to the literature on the foundations of incomplete contracts by providing conditions under which simple delegation of authority is the solution to the complete-contracting problem of the parties. We consider a hold-up framework where both parties profit from an investment that raises the value of an asset. Delegation turns out to be optimal if (i) the decision-dependent parts of the payoffs of the parties are linear in the asset value, and (ii) decisions have no investment-independent effect. If overinvestment might be an issue, delegation, however, with restricted competencies is optimal if some additional continuity requirements are met.

Keywords: delegation; decentralization; authority; incomplete contracts; holdup; property rights (search for similar items in EconPapers)
JEL-codes: D82 D23 L14 L22 (search for similar items in EconPapers)
Date: 2003-05, Revised 2004-08
View list of references View citations in EconPapers

Downloads: (external link)
ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonedp/bgse8_2003.pdf (application/pdf)

Related works:
Working Paper: Delegation of Authority as an Optimal (In)complete Contract (2004)
Journal Article: Delegation of Authority as an Optimal (In)Complete Contract (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bon:bonedp:bgse8_2003

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Germany
Address: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Series data maintained by Daniel Park ().