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Disagreement and informal delegation in organizations

Author

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  • Ekinci, Emre
  • Theodoropoulos, Nikolaos
Abstract
To investigate delegation decisions within organizations, we develop a principal-agent model in which the principal can only informally delegate authority to the agent and the parties openly disagree with each other in the sense of differing prior beliefs about the optimal course of action. Our analysis shows that the degree of disagreement determines what kind of delegation policy the principal can commit to and this, in turn, alters the agent’s effort for information acquisition. Notably, at moderate degrees of disagreement, conditional delegation may arise in equilibrium, whereby the principal credibly commits to allowing the agent to exercise his authority only if he generates additional information about the optimal action. Further, we discuss two extensions in which the principal undertakes an investment that reduces the agent’s cost of acquiring information, and the agent discloses his private information strategically.

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  • Ekinci, Emre & Theodoropoulos, Nikolaos, 2021. "Disagreement and informal delegation in organizations," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:indorg:v:74:y:2021:i:c:s0167718720301193
    DOI: 10.1016/j.ijindorg.2020.102696
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    Cited by:

    1. Emre Ekinci & Nikolaos Theodoropoulos, 2021. "Determinants of Delegation: Evidence from British Establishment Data," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 35(1), pages 50-67.

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    More about this item

    Keywords

    Delegation of authority; Differing priors; Differences of opinion;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

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