Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185775
Authors: 
Celik, Gorkem
Shin, Dongsoo
Strausz, Roland
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper 105
Abstract: 
We study an organization with a top management (principal) and multiple subunits (agents) with private information that determine the organization\'s aggregate efficiency. Under centralization, eliciting the agents\' private information may induce the principal to manipulate aggregate information, which obstructs an effective use of information for the organization. Under delegation, the principal concedes more information rent, but is able to use the agents\' information more effectively. The trade-off between the organizational structures depends on the likelihood that the agents are efficient. Centralization is optimal when such likelihood is low. Delegation, by contrast, is optimal when it is high.
Subjects: 
agency
aggregate information
organization design
JEL: 
D82
D86
Document Type: 
Working Paper

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