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Delegating decisions to organizations

Author

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  • Petros G. Sekeris
  • Dimitrios Xefteris

Abstract

In strategic environments, a principal may increase her payoffs when she delegates decisions to an agent with exogenously or endogenously (e.g. via a contract) diverse preferences. We show that a principal can also increase her payoffs by delegating decisions to an organization of agents -i.e. to a group of rational individuals who interact according to a specified set of rules- even when the agents' preferences are identical to those of the principal. Arguably, this provides novel intuition regarding the contemporary structure of firms in several oligopolistic markets, where decision making is decentralized and the interests of agents and firm owners are, broadly speaking, aligned.

Suggested Citation

  • Petros G. Sekeris & Dimitrios Xefteris, 2018. "Delegating decisions to organizations," University of Cyprus Working Papers in Economics 15-2018, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:15-2018
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    References listed on IDEAS

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    More about this item

    Keywords

    delegation; organizations; decentralization; efficiency;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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