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Delegation and Value Creation

Author

Listed:
  • Gerald Eisenkopf

    (Department of Economics, University of Konstanz, Germany)

  • Stephan Nüesch

    (Business Economics - Corporate Governance - Personnel Economics, University of Zurich, Switzerland)

Abstract

Many scholars argue that the delegation of decision rights to independent institutions promotes trust and specific investments. We test this conjecture with variations of the trust game in which the back transfer decision is delegated to a third party. A randomly chosen third party with a fixed payment induces larger investments over time although the experimental design rules out reputation building. Changes in the third party’s selection procedure eliminate this benefit. If the third party gets a reward for the appointment, delegation actually destroys trust. Investors (unwarrantedly) fear a diffusion of responsibility and lower back transfers in this case.

Suggested Citation

  • Gerald Eisenkopf & Stephan Nüesch, 2013. "Delegation and Value Creation," Working Paper Series of the Department of Economics, University of Konstanz 2013-13, Department of Economics, University of Konstanz.
    • Handle: RePEc:knz:dpteco:1313
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    File URL: http://www.uni-konstanz.de/FuF/wiwi/workingpaperseries/WP_13-Eisenkopf-Nueesch_2013.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Delegation; Trust; Third Party; Appointment procedures; Remuneration;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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