Journal Article

Authority and Communication in Organizations

Wouter Dessein

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 69, issue 4, pages 811-838
Published in print October 2002 | ISSN: 0034-6527
Published online October 2002 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00227
Authority and Communication in Organizations

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This paper studies delegation as an alternative to communication. We show that a principal prefers to delegate control to a better informed agent rather than to communicate with this agent as long as the incentive conflict is not too large relative to the principal's uncertainty about the environment. We further identify cases in which the principal optimally delegates control to an “intermediary”, and show that keeping a veto-right typically reduces the expected utility of the principal unless the incentive conflict is extreme.

Journal Article.  0 words. 

Subjects: Economics

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