Delegation Versus Centralization: The Role of Externalities

Sergio Currarini () and Francesco Feri

No 2006_15, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We study a simple contracting game with a principal and two agents. Contracts exert an externalities on non contractors. The principal can either contract both agents in a centralized manner, or delegate one agent to contract the other. We show that the choice of the principal depends on the sign of the externality. If this is positive, the principal prefers to delegate as long as the agency costs are not too high; if the externality is negative, the principal prefers to centralize for all sizes of agency costs.

Keywords: Contracts; Externalities; Centralization; Delegation. (search for similar items in EconPapers)
JEL-codes: C71 C72 D02 D23 (search for similar items in EconPapers)
Pages: 15pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Delegation versus centralization: The role of externalities (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2006_15

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