Mediating Internal Competition for Resources

Suraj Prasad and Yasunari Tamada

Journal of Industrial Economics, 2024, vol. 72, issue 1, 157-192

Abstract: We consider a model of internal competition, where projects developed by agents with different preferences compete for resources in an organization. Allowing a manager—who has moderate preferences—to control the allocation of resources has benefits when preferences are not too diverse. In particular, the manager acts as a mediator, forcing agents to compromise when competing projects succeed, thus providing better insurance to agents and increasing their effort. Our framework provides a theoretical foundation for two influential views of a manager—as the “visible hand” that allocates resources, and as a “power broker” who resolves conflict in an organization.

Date: 2024
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