Citation

Discussion Paper Details

Please find the details for DP5391 in an easy to copy and paste format below:

Full Details

Title: Externalities, Communication and the Allocation of Decision Rights

Author(s): Helmut Bester

Publication Date: November 2005

Keyword(s): authority, decision rights, externalities, imperfect information, incomplete contracts and theory of the firm

Programme Area(s): Industrial Organization

Abstract: This paper views authority as the right to undertake decisions that impose externalities on other members of the organization. When only decision rights can be contractually assigned to one of the organization's stakeholders, the optimal assignment minimizes the resulting inefficiencies by giving control rights to the party with the highest stake in the organization's decisions. Under asymmetric information, the efficient allocation of authority depends on the communication of private information. In the case of multiple decision areas, divided control rights may enhance organizational efficiency unless there exist complementarities between different decisions.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5391

Bibliographic Reference

Bester, H. 2005. 'Externalities, Communication and the Allocation of Decision Rights'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5391