Delegating decisions to organizations

Petros Sekeris and Dimitrios Xefteris

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: In strategic environments, a principal may increase her payoffs when she delegates decisions to an agent with exogenously or endogenously (e.g. via a contract) diverse preferences. We show that a principal can also increase her payoffs by delegating decisions to an organization of agents -i.e. to a group of rational individuals who interact according to a specified set of rules- even when the agents' preferences are identical to those of the principal. Arguably, this provides novel intuition regarding the contemporary structure of firms in several oligopolistic markets, where decision making is decentralized and the interests of agents and firm owners are, broadly speaking, aligned.

Keywords: delegation; organizations; decentralization; efficiency (search for similar items in EconPapers)
JEL-codes: D71 D72 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2018-11
New Economics Papers: this item is included in nep-cdm and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:15-2018

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