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Empowerment and the Dark Side of Delegation

Matthias Kräkel ()

No 11289, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The existing delegation literature has focused on different preferences of principal and agent concerning project selection, which makes delegating authority costly for the principal. This paper shows that delegation has a cost even when the preferences of principal and agent are exogenously aligned. As application, the commitment effect of empowerment is considered, which has been addressed by the management and social psychology literature. In addition, it is shown that even in a setting without task commitment and other behavioral effects the principal might forgo delegation though being efficient.

Keywords: commitment; delegation; limited liability; moral hazard; renegotiation (search for similar items in EconPapers)
JEL-codes: D86 J33 J41 M5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-ppm
Date: 2018-01
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