TY  - RPRT
        AU  - Kräkel, Matthias
        TI  - Authority and Incentives in Organizations
        PY  - 2013/Mar/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 7271
        UR  - https://www.iza.org/publications/dp7271
        AB  - The paper analyzes how the choice of organizational structure leads to the best compromise between controlling behavior based on authority rights and minimizing costs for implementing high efforts. Concentrated delegation and hierarchical delegation turn out to be never an optimal compromise. If the CEO is more efficient than the division heads (i.e., the CEO's costs from exerting high effort are smaller than those of the division heads), the owner will prefer full delegation to the divisions to replace high incentive pay to the division heads by incentives based on private benefits of control. In that situation, decentralization is the optimal form of full delegation given that selfish behavior is more important than cooperation, but cross-authority delegation is optimal for cooperation being crucial. If, however, the division heads are clearly more efficient than the CEO, the owner will choose centralization given that cooperation is the dominating issue, but partial delegation if selfish behavior is crucial.
        KW  - decentralization
KW  - contracts
KW  - centralization
KW  - authority
KW  - moral hazard
        ER  -