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Authority versus Persuasion

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  • Eric Van den Steen

Abstract

This paper studies a principal's trade-off between using persuasion versus using interpersonal authority to get the agent to 'do the right thing' from the principal's perspective (when the principal and agent openly disagree on the right course of action). It shows that persuasion and authority are complements at low levels of effectiveness but substitutes at high levels. Furthermore, the principal will rely more on persuasion when agent motivation is more important for the execution of the project, when the agent has strong intrinsic or extrinsic incentives, and, for a wide range of settings, when the principal is more confident about the right course of action.
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Suggested Citation

  • Eric Van den Steen, 2009. "Authority versus Persuasion," American Economic Review, American Economic Association, vol. 99(2), pages 448-453, May.
    • Handle: RePEc:aea:aecrev:v:99:y:2009:i:2:p:448-53
    Note: DOI: 10.1257/aer.99.2.448
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    References listed on IDEAS

    as
    1. Yeon-Koo Che & Navin Kartik, 2009. "Opinions as Incentives," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 815-860, October.
    2. Morris, Stephen, 1995. "The Common Prior Assumption in Economic Theory," Economics and Philosophy, Cambridge University Press, vol. 11(2), pages 227-253, October.
    3. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    4. Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 699-746.
    5. Wouter Dessein & Luis Garicano & Robert Gertner, 2010. "Organizing for Synergies," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 77-114, November.
    6. Susan Athey & John Roberts, 2001. "Organizational Design: Decision Rights and Incentive Contracts," American Economic Review, American Economic Association, vol. 91(2), pages 200-205, May.
    7. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    8. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
    9. Eric Van den Steen, 2010. "Interpersonal Authority in a Theory of the Firm," American Economic Review, American Economic Association, vol. 100(1), pages 466-490, March.
    10. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    11. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    12. Van den Steen, Eric, 2007. "The Limits of Authority: Motivation versus Coordination," Working papers 37305, Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Citations

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    Cited by:

    1. Balmaceda, Felipe, 2021. "Private vs. public communication: Difference of opinion and reputational concerns," Journal of Economic Theory, Elsevier, vol. 196(C).
    2. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    3. Hernán Bejarano & Brice Corgnet & Joaquín Gómez-Miñambres, 2019. "Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine!," Working Papers 19-26, Chapman University, Economic Science Institute.
    4. Alonso, Ricardo & Câmara, Odilon, 2016. "Bayesian persuasion with heterogeneous priors," Journal of Economic Theory, Elsevier, vol. 165(C), pages 672-706.
    5. Shaun P. Hargreaves Heap & Kei Tsutsui & Daniel J. Zizzo, 2020. "Vote and voice: an experiment on the effects of inclusive governance rules," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 54(1), pages 111-139, January.
    6. Fulghieri, Paolo & Dicks, David, 2015. "Ambiguity, Disagreement, and Allocation of Control in Firms," CEPR Discussion Papers 10400, C.E.P.R. Discussion Papers.
    7. Brice Corgnet, 2018. "Rac(g)e Against the Machine? Social Incentives When Humans Meet Robots," Post-Print halshs-01984467, HAL.
    8. Onuchic, Paula & Ray, Debraj, 2023. "Conveying value via categories," Theoretical Economics, Econometric Society, vol. 18(4), November.
    9. Escudé, Matteo & Sinander, Ludvig, 2023. "Slow persuasion," Theoretical Economics, Econometric Society, vol. 18(1), January.
      • Matteo Escud'e & Ludvig Sinander, 2019. "Slow persuasion," Papers 1903.09055, arXiv.org, revised Apr 2022.
    10. Brice Corgnet & Roberto Hernán-González & Stephen Rassenti, 2011. "Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations," Working Papers 11-05, Chapman University, Economic Science Institute.
    11. Alonso, Ricardo & Câmara, Odilon, 2014. "Persuading skeptics and reaffirming believers," LSE Research Online Documents on Economics 58680, London School of Economics and Political Science, LSE Library.
    12. Bejarano, Hernán & Corgnet, Brice & Gómez-Miñambres, Joaquín, 2021. "Economic stability promotes gift-exchange in the workplace," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 374-398.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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