Budgeting and Hierarchical Control

Dilip Mookherjee and Stefan Reichelstein

Working Papers from Boston University - Industry Studies Programme

Abstract: This paper develops a model of budgeting in hierarchical organizations. Each agent (manager) in the hierarchy receives a budget for a task; based on his own information, the agent assigns tasks and budgets to his subordinates, who, in turn, do the same for their subordinates and so forth. Each department's performance is measured by the difference between budgeted and actual cost. In this setting we show that a particular budget mechanism is optimal in terms of the incentives it creates and the coordination it achieves.

Keywords: FINANCIAL MARKET; ENTERPRISES; MANAGEMENT (search for similar items in EconPapers)
JEL-codes: G30 G31 L10 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1996
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Budgeting and hierarchical control (1997)
Working Paper: Budgeting and Hierarchical Control (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:bostin:71

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