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Power Dynamics in Organizations

Jin Li, Niko Matouschek and Michael Powell

American Economic Journal: Microeconomics, 2017, vol. 9, issue 1, 217-41

Abstract: We examine an infinitely repeated game between a principal, who has the formal authority to decide on a project, and a biased agent, who is privately informed about what projects are available. The optimal relational contract speaks to how power is earned, lost, and retained. It shows that entrenched power structures are consistent with optimal administration of power. And it provides new perspectives on why similar firms organize differently, even when those organizational differences lead to persistent differences in performance, and why established firms fail to exploit new opportunities, even when they are publicly observable.

JEL-codes: C73 D23 D82 D86 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/mic.20150138
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