IDEAS home Printed from https://ideas.repec.org/a/wly/iecrev/v58y2017i1p211-235.html
   My bibliography  Save this article

Random Authority

Author

Listed:
  • Siguang Li
  • Xi Weng

Abstract

This article rationalizes matrix management in a multiproject organization in which decisions must be adapted to local conditions but also coordinated with each other. Project managers are privately informed about local conditions and communicate strategically via cheap talk. Matrix management is modeled as a randomization over deterministic authority allocations. We show that random authority is strictly optimal when the conflict between adaptation and coordination is very severe or the coordination need is very small. Moreover, the optimal degree of delegation changes nonmonotonically in the coordination need when the incentives of the project managers are sufficiently aligned.

Suggested Citation

  • Siguang Li & Xi Weng, 2017. "Random Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(1), pages 211-235, February.
    • Handle: RePEc:wly:iecrev:v:58:y:2017:i:1:p:211-235
    DOI: 10.1111/iere.12214
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/iere.12214
    Download Restriction: no
    File URL: https://libkey.io/10.1111/iere.12214?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Wouter Dessein & Luis Garicano & Robert Gertner, 2010. "Organizing for Synergies," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 77-114, November.
    2. Heikki Rantakari, 2013. "Organizational Design and Environmental Volatility," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(3), pages 569-607, June.
    3. Kovác, Eugen & Mylovanov, Tymofiy, 2009. "Stochastic mechanisms in settings without monetary transfers: The regular case," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1373-1395, July.
    4. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2015. "Organizing to Adapt and Compete," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 158-187, May.
    5. Robert Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 337-365, September.
    6. Chen, Ying, 2011. "Perturbed communication games with honest senders and naive receivers," Journal of Economic Theory, Elsevier, vol. 146(2), pages 401-424, March.
    7. Patrick Bolton & Mathias Dewatripont, 2012. "Authority in Organizations [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    8. Wouter Dessein, 2002. "Authority and Communication in Organizations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 811-838.
    9. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
    10. Christopher Hood & Oliver James & B. Guy Peters & Colin Scott (ed.), 2004. "Controlling Modern Government," Books, Edward Elgar Publishing, number 3290.
    11. Krahmer, Daniel, 2006. "Message-contingent delegation," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 490-506, August.
    12. Kenneth Knight, 1976. "Matrix Organization: A Review," Journal of Management Studies, Wiley Blackwell, vol. 13(2), pages 111-130, May.
    13. Krishna, Vijay & Morgan, John, 2004. "The art of conversation: eliciting information from experts through multi-stage communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 147-179, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Shuo & Migrow, Dimitri, 2022. "When does centralization undermine adaptation?," Journal of Economic Theory, Elsevier, vol. 205(C).
    2. Laura Alfaro & Nick Bloom & Paola Conconi & Harald Fadinger & Patrick Legros & Andrew F Newman & Raffaella Sadun & John Van Reenen, 2024. "Come Together: Firm Boundaries and Delegation," Journal of the European Economic Association, European Economic Association, vol. 22(1), pages 34-72.
    3. Chirantan Ganguly & Indrajit Ray, 2023. "Simple Mediation in a Cheap-Talk Game," Games, MDPI, vol. 14(3), pages 1-14, June.
    4. Elisa Gerten & Michael Beckmann & Elisa Gerten & Matthias Kräkel, 2022. "Information and Communication Technology, Hierarchy, and Job Design," ECONtribute Discussion Papers Series 189, University of Bonn and University of Cologne, Germany.
    5. Ivanov, Maxim, 2010. "Informational control and organizational design," Journal of Economic Theory, Elsevier, vol. 145(2), pages 721-751, March.
    6. Chirantan Ganguly & Indrajit Ray, 2009. "Simple Mediation in a Cheap-Talk Game," Discussion Papers 05-08r, Department of Economics, University of Birmingham.
    7. Helmut Bester, 2009. "Externalities, communication and the allocation of decision rights," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(2), pages 269-296, November.
    8. Blume, Andreas & Deimen, Inga & Inoue, Sean, 2022. "Incomplete contracts versus communication," Journal of Economic Theory, Elsevier, vol. 205(C).
    9. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization?," American Economic Review, American Economic Association, vol. 98(1), pages 145-179, March.
    10. Migrow, Dimitri, 2021. "Designing communication hierarchies," Journal of Economic Theory, Elsevier, vol. 198(C).
    11. Lim, Wooyoung, 2012. "Selling authority," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 393-415.
    12. Wouter Dessein & Richard Holden, 2022. "Organizations with Power-Hungry Agents," Journal of Law and Economics, University of Chicago Press, vol. 65(S1), pages 263-291.
    13. Murali Agastya & Parimal Kanti Bag & Indranil Chakraborty, 2014. "Communication and authority with a partially informed expert," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 176-197, March.
    14. Lim, Wooyoung, 2014. "Communication in bargaining over decision rights," Games and Economic Behavior, Elsevier, vol. 85(C), pages 159-179.
    15. Petros G. Sekeris & Dimitrios Xefteris, 2021. "Strategic Delegation to Organizations," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 900-922, December.
    16. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    17. Goltsman, Maria & Hörner, Johannes & Pavlov, Gregory & Squintani, Francesco, 2009. "Mediation, arbitration and negotiation," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1397-1420, July.
    18. Krähmer, Daniel & Kováč, Eugen, 2016. "Optimal sequential delegation," Journal of Economic Theory, Elsevier, vol. 163(C), pages 849-888.
    19. Katayama, Hajime & Meagher, Kieron J. & Wait, Andrew, 2018. "Authority and communication in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 315-348.
    20. Asuyama, Yoko, 2020. "Delegation to workers across countries and industries: Interacting effects of social capital and coordination needs," International Journal of Industrial Organization, Elsevier, vol. 69(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:iecrev:v:58:y:2017:i:1:p:211-235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.