Delegation of Authority as an Optimal (In)Complete Contract

Andreas Roider

Journal of Institutional and Theoretical Economics (JITE), 2006, vol. 162, issue 3, 391-411

Abstract: This paper contributes to the literature on the foundations of incomplete contracts. In a holdup framework, we provide two sets of conditions under which simple delegation of authority is the solution to the complete-contracting problem. In cases where overinvestment can be ruled out, delegation is optimal if the payoffs of the parties satisfy certain separability conditions. If overinvestment might be an issue, delegation (possibly with restricted competencies) is optimal if additionally some continuity requirements are met. The paper also contributes to the literature on delegation, where such replication results have previously been derived in settings with asymmetric information.

JEL-codes: D23 D82 L14 L2 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Delegation of Authority as an Optimal (In)complete Contract (2004)
Working Paper: Delegation of Authority as an Optimal (In)complete Contract (2003)
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