We examine the question whether a decision should be delegated to a subordinate and whether this is done efficiently. We illustrate that delegation is useful for several reasons. First, it serves to test agents with unknown ability. Then, it may improve their motivation when carrying out decisions. Moreover, delegation to subordinates may be useful to limit the power of middle managers. Costs of delegation arise due to the risk of having lower quality decisions and because after having made a successful decision a subordinate's power is increased. The latter may lead to inefficient delegation decisions.
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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number
600.
Length: Date of creation: Jul 1999 Date of revision: Handle: RePEc:bon:bonsfa:600
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany Fax: +49 228 73 9221 Web page: http://www.bgse.uni-bonn.de/index.php?id=517
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