Delegation versus centralization: The role of externalities |
| |
Affiliation: | 1. Department of Economics, University of Graz, Universitäts-straße 15, 8010 Graz, Austria;2. Department of Economics, University of Bath, 3 East, Bath, BA2 7AY, UK;3. Department of Economics, University of Wisconsin-Milwaukee, PO Box 413, Milwaukee, WI 53201, USA |
| |
Abstract: | We study a simple contracting game with a principal and two agents. Contracts exert externalities on non-contractors. The principal can either contract both agents in a centralized manner, or delegate one agent to contract the other. We show that the choice of the principal depends on the sign of the externality. If this is positive, the principal prefers to delegate as long as the agency costs are not too high; if the externality is negative, the principal prefers to centralize for all sizes of agency costs. |
| |
Keywords: | |
本文献已被 ScienceDirect 等数据库收录! |
|