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Allocation of Authority when a Person is not a Robot

Author

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  • Li, Jianpei
  • Wu, Yanhui

Abstract

We formalize a conception of authority, which is commonly defined as the right of controlling a person’s actions embedded in human assets in sociology. Due to the inalienable property of human assets, the contractible formal authority is hard to verify and enforce, while real authority usually diverges from formal authority. Inefficiency tends to arise when a task is not routine or can not be done by a robot. Using a framework of incomplete contract, we show that allocation of formal authority, as an instrument to mitigate the inefficiency, is determined by features of tasks and specificity of assets, and the relationship between the resources. Monitoring is then introduced to fine tune value of delegation.

Suggested Citation

  • Li, Jianpei & Wu, Yanhui, 2007. "Allocation of Authority when a Person is not a Robot," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 211, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:211
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    More about this item

    Keywords

    Transaction of human assets; real authority; formal authority; delegation; monitor;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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