Externalities, Communication and the Allocation of Decision Rights

Helmut Bester

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

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.

Keywords: Authority; Decision Rights; Externalities; Incomplete Contracts (search for similar items in EconPapers)
JEL-codes: D23 D82 L22 P14 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Externalities, communication and the allocation of decision rights (2009)
Working Paper: Externalities, Communication and the Allocation of Decision Rights (2005)
Working Paper: Externalities, communication and the allocation of decision rights (2005)
Working Paper: Externalities, Communication and the Allocation of Decision Rights
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