Delegation versus Veto in Organizational Games of Strategic Communication

In organizations, principals use decision rules to govern a more informed agent's behavior. We compare two such rules: delegation and veto. Recent work suggests that delegation dominates veto unless the divergence in preferences between the principal and the agent is so large that informative communication cannot take place. We show that this result does not hold in a reasonable model of veto versus delegation. In this model, veto dominates delegation for any feasible divergence in preferences, if it induces the agent to shut down low quality proposals that he would otherwise implement and if such projects have sufficient likelihood.     

Competition,strategic delegation and delay in technology adoption

This paper examines how strategic managerial delegation affects firms' timing of adoption of a new technology under different modes of product market competition. It demonstrates that strategic delegation has differential impacts on adoption dates under Cournot and Bertrand competitions. Strategic delegation with ‘own-performance’-based incentive schemes always leads to early adoption in markets with Bertrand competition compared to that under no-delegation, but not necessarily so in markets with Cournot competition. It also shows that under strategic delegation with ‘own-performance’-based incentive schemes, adoption occurs earlier (later) in markets with Cournot competition than in markets with Bertrand competition, if the degree of product differentiation is high (low). In contrast, under strategic delegation with ‘relative-performance’-based incentive schemes, adoption dates do not differ across markets with different modes of competition. It also analyses implications of firms' choice over types of managerial incentive schemes on the speed of diffusion of new technology.     

Innovation management in organizations

This paper poses the question of how a firm should optimally choose both its organization and its compensation in the pursuit of innovation. One key result is that incentive pay arises as a robust instrument of innovation management both with and without delegation, although in the present model its primary purpose is not to elicit more effort for the creation of new ideas, but to ensure that new ideas are implemented if and only if this is efficient. While without delegation, the firm may “underinvest” in innovation, with delegation the opposite bias may arise as new ideas may be implemented too often (“overinvestment”). The optimal organizational choice trades off these two biases.     

COOPERATIVE MANAGERIAL DELEGATION,R&D AND COLLUSION

Existing literature on managerial delegation indicates that collusive outcomes can be obtained in an oligopoly game through cooperative managerial delegation. In contrast, this paper shows that, if managers are delegated to choose R&D, in addition to choosing production levels, full‐collusive outcomes cannot be achieved through cooperative delegation. Moreover, (i) under cooperative delegation, semi‐collusion always yields lower profit, higher R&D, higher price and lower social welfare than that in the case of competition and (ii) cooperative delegation leads to a higher profit lower R&D, higher price and lower social welfare than the no delegation case, irrespective of product market conduct.     

Delegation and firms’ ability to collude

In a model of repeated Cournot competition under complete information, we show that delegation has no effect on cartel stability if managers collude, while it may hinder cartel stability when owners collude in setting the incentive schemes. If owners can choose whether to delegate or keep control of their respective firms, and both groups of individuals collude or play non-cooperatively in their respective variables according to the level of intertemporal discount factor, then if managers are not able to collude in output levels, owners’ delegation decision is non-monotone in the discount factor.     

多层科层中的最优序贯授权与"一刀切"政策

沿袭Tirole(1986)的委托人-中间人-代理人科层结构,本文研究了当委托人不能直接管理代理人时的最优序贯授权问题。在该授权博弈中,委托人通过审慎设计中间人职权范围,影响其对代理人的授权行为,从而激励代理人更有效地提供和使用信息。我们发现,当下属之间利益偏差方向一致时,即中间人较委托人更愿意扩大代理人权限时,采用文献中常关注的"区间授权"(Holmstrom,1977)形式,委托人可以实现其直接向代理人授权时的最优结果。但是,如果下属间利益偏差方向相反,即中间人希望减小代理人权限时,"区间授权"将不再是最优。为了更好地影响控制中间人向代理人的次第授权行为,在最优序贯授权方案中委托人将移除部分中间选项。移除选项数目的多少取决于中间人的利益偏差程度。同授权与激励方面的文献不同,本文表明,即使在信息结构给定的条件下,移除中间项将作为科层中的控制工具,成为最优授权方案的一个特征。本文的发现从激励和授权角度对现行的一些法规执行实践中的"一刀切"政策(比如,"醉驾入刑"、大学招生录取等)提供了一些解释。     

多层科层中的最优序贯授权与"一刀切"政策

沿袭Tirole(1986)的委托人一中间人一代理人科层结构,本文研究了当委托人不能直接管理代理人时的最优序贯授权问题。在该授权博弈中,委托人通过审慎设计中间人职权范围,影响其对代理入的授权行为,从而激励代理人更有效地提供和使用信息。我们发现,当下属之间利益偏差方向一致时,即中间人较委托入更愿意扩大代理人权限时,采用文献中常关注的“区间授权”(Holm—strom,1977)形式,委托人可以实现其直接向代理人授权时的最优结果。但是,如果下属间利益偏差方向相反,即中间人希望减小代理人权限时,“区间授权”将不再是最优。为了更好地影响控制中间人向代理人的次第授权行为,在最优序贯授权方案中委托人将移除部分中间选项。移除选项数目的多少取决于中间人的利益偏差程度。同授权与激励方面的文献不同,本文表明,即使在信息结构给定的条件下,移除中间项将作为科层中的控制工具,成为最优授权方案的一个特征。本文的发现从激励和授权角度对现行的一些法规执行实践中的“一刀切”政策(比如,“醉驾入刑”、大学招生录取等)提供了一些解释。     

Political polarization and international cooperation

We analyze the consequences of political polarization between domestic policymakers for international policy coordination or delegation to a common agency. Coordination is preferred under political polarization if it allows to constrain the policy of policymakers with different policy targets, while delegation allows to determine policies in the future by selecting the appropriate agent. Policymakers have different preferences concerning international coordination and which form it should take. These differences are increasing in political polarization. They agree on delegation if election outcomes are close to being random.     

Credible delegation

We show that the vertical delegation of decision-making authority to agent firms can act as a credible strategic commitment even when contracts are unobservable (or renegotiable) if and only if multilateral delegation is combined with decentralized ownership of the agent firms. In this case, the possibility of renegotiation of other agents’ contracts constrains the set of contracts acceptable to each agent. Delegation may induce more or less aggressive behavior, depending on the nature of within-structure competition among the agent firms. Thus, delegation may be a valuable, credible strategic commitment mechanism when strategies are either substitutes or complements.     

Managerial delegation and partial privatization in general equilibrium with sector-specific unemployment

This paper explores the effects of managerial delegation in a general-equilibrium, oligopolistic competition model with sector-specific unemployment. It specifically examines the effects of managerial delegation on outputs, factor returns and the urban unemployment ratio. It is found that if the managerial firm is less profit-oriented, managerial delegation can lead to an increase in the urban output, a decrease in the rural output, an increase in the capital rental and a decrease in the rural wage. In particular, it worsens the urban unemployment ratio.     

Selection by committee: Anonymity and gratitude

What kind of candidate is selected into a job when the principal has to appoint a committee to measure the candidates’ ability and select a winner? We find that if the committee takes into account the candidate’s gratitude towards them, a candidate with less than first best ability will be selected. A relevant exception may occur if the first best is the overall best candidate. First best selection is always achieved if the committee is anonymous to the candidates. If the committee is not detached enough from the candidates then delegation fares even worse than random selection.     

A NOTE ON ENDOGENOUS TIMING WITH STRATEGIC DELEGATION: UNILATERAL EXTERNALITY CASE

We investigate the endogenous choice of roles by managerial firms in the presence of unilateral externality. The choice over timing can be taken either by managers or by owners. It is shown that: (i) the choice of the timing by managers entails the same profit that owners would have achieved by specifying the timing in the delegation contract; and (ii) firms move simultaneously if the degree of unilateral externality is small, while sequentially if the degree of unilateral externality is large, with the firm generating unilateral externality as a follower; the owner of the follower firm delegates to restrict output, while his/her counterpart does not delegate it.     

Motivating Through Delegating Tasks or Giving Attention

An important role of managers is to motivate subordinates. Monetaryrewards have been the focus of economic analysis. Managers alsouse other means to influence subordinates. If a manager canbetter assess the subordinate's ability than the subordinatehimself, and if ability and effort are complements, the managerfinds it hard not to overstate a junior's ability. Talk is cheap.We analyze under what conditions a manager can use organizationalpractices such as delegation and the selective provision ofattention to credibly communicate his assessment. We comparetheir desirability. Delegation is preferable in case the manager'sassessment is fairly accurate; attention is inescapable if itis inaccurate.     

Technology transfer with commitment

Summary. This paper considers technology transfer in a duopoly where the firms have two types of commitment strategies: incentive delegation and capacity installation. It turns out that the possibility of technology transfer significantly differs under these two types of commitment as well as depending on whether one or both firms commit. Under strategic incentive delegation, the possibility of technology transfer is minimal when both firms use the incentive delegation strategy and the costs of incentive delegation are negligible. If both firms choose the incentive delegation strategy and the costs of incentive delegation are significant then the possibility of technology transfer rises compared to a situation with no pre-commitment. In case of commitment to a capacity level before production, the possibility of technology transfer does not change when both firms simultaneously commit to their capacity levels. Different sets of results arise when only one firm can pre-commit. Received: February 10, 1997; revised version: December 16, 1999     

Dynamic enfranchisement

Why would an enfranchised elite voluntarily dilute its power by expanding the franchise? The central intuition behind our analysis is that the dilution of power by an enfranchised elite is equivalent to the delegation of power by one member of the elite—a pivotal voter—to another citizen, who in turn becomes the pivotal voter in the new (expanded) elite. Such delegation might be useful if it allows the current pivotal voter to credibly commit to future policy choices. The current pivotal voter realizes that the agent to whom authority is delegated will face similar incentives to subsequently transfer power, and this effect tempers the extent to which the franchise is extended. We develop a recursive, infinite horizon model that generates the possibility of gradual franchise expansion. We show that, in equilibrium, expansion occurs if and only if the private decisions of the citizenry have a net positive spillover to the dynamic payoff of the current pivotal voter. The class of games we study can accommodate a number of proposed explanations for franchise extension, including the threat of insurrection, and ideological or class conflict within the elite.     

Delegating Power to Bureaucracies: Evidence from the States

Empirical analysis has lagged behind theoretical advancementin the study of legislative delegation of power to bureaucracies.This article analyzes why state legislatures delegated advisoryand policy-forming powers to bureaucracies for the Aid to Familieswith Dependent Children (AFDC) program from 1935 through 1996.The analysis supports various theories of bureaucratic discretion,while painting a complex political picture of delegation decisions.Legislators rely on bureaucrats to resolve uncertainty, especiallywhen internal legislative information is scarce. Contrary torecent wisdom, however, delegation is not found to be associatedwith the general condition of unified government. Rather, delegationoccurs under both divided and unified government, but the procedureschosen and appointment powers granted vary under these two conditions.     

Strategic Delegation of Multiple Tasks

This paper studies both the owner–manager relationship and the union–firm relationship in a model of unionised duopoly to analyse whether a firm's owner delegates the task of wage bargaining to a manager along with the task of output determination. We also analyse the profit and welfare effects of multiple‐task delegation. It has been shown in the literature that, when there is only one delegation task – output determination – delegation of output decisions to managers leads to lower profits for owners than non‐delegation as pure profit‐maximisation. However, when there are two delegation tasks as in our model – output determination and wage bargaining – we show that owners are better off delegating both tasks than delegating only the output decision or not delegating at all. This result provides a rationale and managerial insight for strategically delegating multiple tasks to managers. Moreover, we show that union utility, consumer surplus and social welfare are all higher when owners do not delegate the task of wage bargaining than when they do. This result suggests that governments implement union contracts that require owners, rather than managers, to negotiate wages with unions in order to benefit unions and consumers and to improve social welfare as well.     

Adaptive contracting: the trial-and-error approach to outsourcing

Summary. Adaptive contracting occurs when a principal experiments with the delegation of authority through leaving contracts incomplete. We highlight two potential benefits of adaptive contracting: First, the delegation of authority can be advantageous even if the agent acts opportunistically, since expected private benefits will be shared between the parties through price negotiation. Second, the principal extracts information from experimenting with delegation of authority and we identify a positive option value embodied in the principals ability to extend or withdraw the delegated authority in future contracting periods.Received: 14 April 2003, Revised: 26 January 2004, JEL Classification Numbers: D72, L33, L97.We thank John Sørensen and Henrik Severin Hansen for introducing us to the contractual and economical issues in local bus outsourcing in Denmark, Oliver Hart and Antonio Rangel for early discussions on adaptive contracting and Christian Aastrup for research assistance. We are grateful to Danish Transportation Research Institute (www.dtf.dk) for comments and financial support for this project.     

多代理人情形下的授权结构与激励

现有关于授权与激励的文献侧重于考察"是否授权"的问题。本文研究不同授权结构之间激励效果的比较。沿袭Aghion and Tirole(1997),本文在"一个委托人-两个代理人"的框架下,区分了"平行授权"、"优先授权"和"次第授权"三种授权结构。我们发现,项目带给代理人的净私人收益越大、代理人之间异质性越强、代理人之间的正外部性越弱(或负外部性越强),次第授权和优先授权越可能好过平行授权;反之,则平行授权越可能占优。当项目必须完成的时间越紧急,平行授权或优先授权越可能好过次第授权;反之,则次第授权越可能占优。我们的发现从激励和授权角度对组织(比如,董事会、公司、议会、政府机构)内部授权结构的一些现象提供了一些解释。     

多任务下的协调和授权

在逆向选择框架中,我们考察多任务下两种激励的协调和对应授权问题。具体来说,我们主要关注三个问题:一是多任务时两种激励如何作用,以及决定的因素是什么;二是在多任务的框架中,授权发生基本机制是什么,激励的相互作用对于授权的影响是什么;三是在多任务的条件下利益关系和组织的权利结构是否存在对应的关系,利益冲突的增加是否有利于授权。