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| Title: | | Delegation of Authority as an Optimal (In)complete Contract  |
| Authors: | | Roider, Andreas |
| Issue Date: | | 2004 |
| Series/Report no.: | | IZA Discussion paper series 1298 |
| Abstract: | | The present paper aims to contribute to the literature on the foundations of incomplete contracts by providing conditions under which simple delegation of authority is the solution to the complete-contracting problem of the parties. We consider a hold-up framework where both parties profit from an investment that raises the value of an asset. Delegation turns out to be optimal if (i) the decision-dependent parts of the payoffs of the parties are linear in the asset value, and (ii) decisions have no investment-independent effect. If overinvestment might be an issue, delegation, however, with restricted competencies is optimal if some additional continuity requirements are met. |
| Subjects: | | delegation decentralization authority incomplete contracts hold-up property rights |
| JEL: | | L14 D23 D82 L22 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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