The Optimal Allocation of Power in Organisations

E. Carbonara

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: Starting from the separation between formal and real authority, the paper considers a hierarchical relation where delegation of control can be used as an incentive mechanism. It shows that delegation is optimal when parties interests are neither too divergent nor too close. In that case superiors do not need to monitor too closely, curbing the subordinates initiative and subordinates have no incentives to free ride on the superiors information. The analysis is then extended to a multi-period setting. If subordinates acquire expertise on the job (learning by doing), effort has the nature of a specific investment whose intrinsic value is higher the longer the subordinate s working life. Therefore, a policy of gradual delegation is possible, where agents accept weaker incentives at the beginning of their career, requiring stronger incentives over time as the value of their knowledge diminishes.

Date: 1999-10
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://amsacta.unibo.it/4951/1/358.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:358

Access Statistics for this paper

More papers in Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna Contact information at EDIRC.
Bibliographic data for series maintained by Dipartimento Scienze Economiche, Universita' di Bologna ().