Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22837 
Authors: 
Year of Publication: 
2003
Series/Report no.: 
Bonn Econ Discussion Papers No. 8/2003
Publisher: 
University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn
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
holdup
property rights
JEL: 
L22
D82
L14
D23
Document Type: 
Working Paper

Files in This Item:
File
Size
443.91 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.