Organizations with Power-Hungry Agents
Wouter Dessein and
Richard Holden ()
Journal of Law and Economics, 2022, vol. 65, issue S1, S263 - S291
We analyze a model of hierarchies in organizations in which neither decisions nor the delegation of decisions is contractible and in which power-hungry agents derive a private benefit from making decisions. Two distinct agency problems arise and interact: subordinates make more biased decisions (which favors adding more hierarchical layers), but uninformed superiors may fail to delegate (which favors removing layers). A designer may remove intermediate layers of the hierarchy (eliminate middle managers) or flatten an organization by removing top layers (eliminate top managers). We show that stronger preferences for power result in smaller, less-integrated hierarchies. Our key insight is that hoarding of decision rights is especially severe at the top of the hierarchy.
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Access to the online full text or PDF requires a subscription.
Working Paper: Organizations with Power-Hungry Agents (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:doi:10.1086/718852
Access Statistics for this article
More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().