Delegation, Externalities and Organizational Design

In a repeated interaction between and a principal and two agents with inter-agents externalities and asymmetric information, we show that optimal decentralization within the organization is limited to the first period and across agents.

Delegation, externalities and organizational design

In a repeated interaction between a principal and two agents with inter-agents externalities and asymmetric information, we show that optimal decentralization within the organization is limited to the first period and across agents.Delegation, Hierarchy, Asymmetric information

Strategic delegation in experimental duopolies with endogenous incentive contracts

Often, deviations of firm behavior from profit maximization are the result of managerial incentive contracts. We study the endogenous emergence of incentive contracts used by firm owners to delegate the strategic decisions of the firm. These contracts are linear combinations either of own firm's profits and revenues, or own and rival firms' profits. A two- and three-stage game are studied depending on whether owners commit or not to a certain contract type before setting the managerial incentives and the level of output to produce in the market. We report experimental results which confirm some of the predictions of the model, especially those concerning owners' preference for relative performance incentives over profit-revenue contracts. Neglected behavioral aspects are proposed as possible explanation of some divergence between the theory and the experimental evidence, more specifically the relation between contract terms and managers' output choicesExperimental economics; Oligopoly theory; Managerial delegation; Endogenous contracts.

Knowledge Management What Can Organizational Economics Contribute?

Knowledge management has emerged as a very successful organization practice and has been extensively treated in a large body of academic work. Surprisingly, however, organizational economics (i.e., transaction cost economics, agency theory, team theory and property rights theory) has played no role in the development of knowledge management. We argue that organizational economics insights can further the theory and practice of knowledge management in several ways. Specifically, we apply notions of contracting, team production, complementaries, hold-up, etc. to knowledge management issues (i.e., creating and integration knowledge, rewarding knowledge workers, etc.) , and derive refutable implications that are novel to the knowledge management field from our discussion.Transaction costs, organizational economics

Delegation and Organizational Design

This paper concentrates on the question of organizational design under asymmetric information. The design of the organization has two parts: first, communication channels between the members should be established and second, the tasks should be allocated to the party that performs it in the most efficient way. We show that if the decisions are delegated to the agents, the agent's decisions reveal the information they have to the principal. Delegation is then a mechanism to transfer information. Given that delegation is costly, the principal should decide how many decisions she delegates. In this paper, we show that delegation is only partial. The agents do not receive power over all decisions and some agents may receive power will the other will not even if they are identical.Delagation;Hierarchy;Assymmetric information

A Theory of Capital Structure with Strategic Defaults and Priority Violations

We reformulate the classic CSV model of financial contracting from Townsend (1979) and Gale & Hellwig (1985) to tackle criticisms raised against it voiced by Hart (1995), such as lack of optimal behavior at the repayment stage and an inability to allow for outside equity. As a result, we obtain a theory of capital structure that accommodates empirical regularities such as bankruptcies, strategic defaults of debt obligations, and violations of absolute priority rules as parts of the equilibrium description.Cash Diversion, Costly State Verification, Outside Equity, Financial Contracts.