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Empowerment and the Dark Side of Delegation

Author

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  • Kräkel, Matthias

    (University of Bonn)

Abstract

The existing delegation literature has focused on different preferences of principal and agent concerning project selection, which makes delegating authority costly for the principal. This paper shows that delegation has a cost even when the preferences of principal and agent are exogenously aligned. As application, the commitment effect of empowerment is considered, which has been addressed by the management and social psychology literature. In addition, it is shown that even in a setting without task commitment and other behavioral effects the principal might forgo delegation though being efficient.

Suggested Citation

  • Kräkel, Matthias, 2018. "Empowerment and the Dark Side of Delegation," IZA Discussion Papers 11289, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11289
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    File URL: https://docs.iza.org/dp11289.pdf
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    More about this item

    Keywords

    commitment; delegation; limited liability; moral hazard; renegotiation;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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