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A common agency within bureaucracy

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  • Nadide Banu OLCAY

    (University of Cologne, Germany)

Abstract

We explore the welfare implications of multiple principals in the top level of bureaucracy. An agent has to carry out two separate tasks, which can either be organized by two separate principals, or combined under one principal. The relationship between the top level (the principals) and the lower level (agent) of bureaucracy is a “principal-agent problem”. The presence of multiple principals generates a “common agency”. We show that the optimal bureaucratic structure depends on the existence of rents from office: the two systems produce equally welfare-efficient outcomes if there are no rents, a singleprincipal model dominates common agency otherwise.

Suggested Citation

  • Nadide Banu OLCAY, 2016. "A common agency within bureaucracy," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(607), S), pages 73-102, Summer.
    • Handle: RePEc:agr:journl:v:xxiii:y:2016:i:2(607):p:73-102
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    References listed on IDEAS

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    3. Avinash Dixit, 2006. "Predatory States and Failing States: An Agency Perspective," Working Papers 71, Princeton University, Department of Economics, Center for Economic Policy Studies..
    4. Claudio Mezzetti, 1997. "Common Agency with Horizontally Differentiated Principals," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 323-345, Summer.
    5. Laussel, Didier & Le Breton, Michel, 1998. "Efficient Private Production of Public Goods under Common Agency," Games and Economic Behavior, Elsevier, vol. 25(2), pages 194-218, November.
    6. Avinash Dixit, 2006. "Predatory States and Failing States: An Agency Perspective," Working Papers 71, Princeton University, Department of Economics, Center for Economic Policy Studies..
    7. repec:pri:cepsud:131dixit is not listed on IDEAS
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