Disobedience and Authority*

Jan Zabojnik

The Journal of Law, Economics, and Organization, 2010, vol. 26, issue 3, 427-459

Abstract: This article presents a theory of the allocation of authority in an organization in which centralization is limited by the agent's ability to disobey the principal. We extend the concept of real authority by observing that not only does the principal have to be informed to give an order but also the worker must be willing to follow the order. We show that workers are given more authority when they are costly to replace or do not mind looking for another job, even if they have no better information than the principal. The allocation of authority thus depends on external market conditions as well as the information and agency problems emphasized in the literature. We explore the implications of this insight for hiring policies and managerial styles. The Author 2009. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2010
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