The Allocation of Authority in a Joint Project under Limited Liability

Kerstin Puschke

Journal of Institutional and Theoretical Economics (JITE), 2007, vol. 163, issue 3, 394-410

Abstract: Authority is modeled as the right to undertake a noncontractible decision in a joint project. The decision-maker is assumed to exert an externality on the other parties; overall surplus is shared according to generalized Nash bargaining. Under limited liability, the agent whose marginal costs increase faster receives authority if the agents' cost functions are very different. If the agents have similar marginal cost functions, bargaining power determines the allocation of authority. Possible applications include the introduction of a new product.

JEL-codes: D23 D86 L22 (search for similar items in EconPapers)
Date: 2007
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