Delegation and incentives

Helmut Bester and Daniel Krähmer

No 2007/1, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: This paper analyses the relation between authority and incentives. It extends the standard principal / agent model by a project selection stage in which the principal can either delegate the choice of project to the agent or keep the authority. The agent's subsequent choice of e ort depends both on monetary incentives and the selected project. We nd that the consideration of e ort incentives makes the principal less likely to delegate the authority over projects to the agent. In fact, if the agent is protected by limited liability, delegation is never optimal.

Keywords: Authority; delegation; incentives; moral hazard; principal / agent problem; limited liability (search for similar items in EconPapers)
JEL-codes: D8 D82 (search for similar items in EconPapers)
Date: 2006
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Related works:
Journal Article: Delegation and incentives (2008)
Working Paper: Delegation and Incentives (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:20071

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