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Reputation Concerns And Authority In Organizations

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  • KIM, DOYOUNG

Abstract

The paper studies the optimal allocation of authority in an organization where an agent, who has reputation concerns, strategically transmits his information to the principal. The optimal allocation of authority allows its holder to use more and better information in order to make efficient decisions. The paperidenti fies the mechanism through which the agentʼs reputation concerns affect his information transmission. It shows that under centralization the agent transmits his information truthfully to the principal only if his reputation concerns are low and therefore that the delegation of authority to the agent can be optimal if the agentʼs reputation concerns are high.

Suggested Citation

  • Kim, Doyoung, 2017. "Reputation Concerns And Authority In Organizations," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 58(2), pages 89-106, December.
    • Handle: RePEc:hit:hitjec:v:58:y:2017:i:2:p:89-106
    DOI: 10.15057/28956
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    References listed on IDEAS

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    More about this item

    Keywords

    authority; delegation; centralization; reputation concerns; information transmission;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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