The Delegation of Decision Rights: An Experimental Investigation

50 Pages Posted: 1 Jun 2014 Last revised: 9 Jul 2015

See all articles by Jennifer C. Coats

Jennifer C. Coats

Colorado State University, Fort Collins

Frederick W. Rankin

Colorado State University, Fort Collins - College of Business

Date Written: July 8, 2015

Abstract

Despite the benefits of delegating decision rights, it is claimed that firms under delegate decision-making authority. However, to date, this claim is untested. This paper explores the choice between information elicitation and delegation. We also examine the effect of this choice on the subordinates’ incentives to gather decision facilitating information. We find that, compared to agency theory predictions, superiors do not delegate as much as they should and subordinates respond by devoting less effort to the acquisition of valuable information. Compared to the case where the decision is delegated, subordinates exert less effort when their information is elicited for both behavioral and economic reasons. This behavior results in superiors earning less profit.

Keywords: Information, Delegation, Experiment, Elicitation

Suggested Citation

Coats, Jennifer C. and Rankin, Frederick W., The Delegation of Decision Rights: An Experimental Investigation (July 8, 2015). Available at SSRN: https://ssrn.com/abstract=2443919 or http://dx.doi.org/10.2139/ssrn.2443919

Jennifer C. Coats

Colorado State University, Fort Collins ( email )

Fort Collins, CO 80523-1771
United States

Frederick W. Rankin (Contact Author)

Colorado State University, Fort Collins - College of Business ( email )

Fort Collins, CO 80523
United States

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