Empowerment and the Dark Side of Delegation

43 Pages Posted: 29 Jan 2018

See all articles by Matthias Kräkel

Matthias Kräkel

University of Bonn - Economic Science Area; Institute for the Study of Labor (IZA)

Abstract

The existing delegation literature has focused on different preferences of principal and agent concerning project selection, which makes delegating authority costly for the principal. This paper shows that delegation has a cost even when the preferences of principal and agent are exogenously aligned. As application, the commitment effect of empowerment is considered, which has been addressed by the management and social psychology literature. In addition, it is shown that even in a setting without task commitment and other behavioral effects the principal might forgo delegation though being efficient.

Keywords: commitment, delegation, limited liability, moral hazard, renegotiation

JEL Classification: D86, J33, J41, M5

Suggested Citation

Kräkel, Matthias, Empowerment and the Dark Side of Delegation. IZA Discussion Paper No. 11289, Available at SSRN: https://ssrn.com/abstract=3111162 or http://dx.doi.org/10.2139/ssrn.3111162

Matthias Kräkel (Contact Author)

University of Bonn - Economic Science Area ( email )

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Institute for the Study of Labor (IZA)

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