Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/28055
Authors: 
Puschke, Kerstin
Year of Publication: 
2007
Series/Report no.: 
Diskussionsbeiträge des Fachbereichs Wirtschaftswissenschaft der Freien Universität Berlin 2007/10
Abstract: 
We analyze the optimal decision-making hierarchy in an organization when decision-makers of limited liability have preferences conflicting with the organization's objective and exert externalities on their counterparts. In a horizontal hierarchy, every decision is made by a different agent. In a vertical hierarchy, one agent is in charge of all decisions. Only this agent is incentivized. This advantage is outweighed if there is a horizontal hierarchy so that the decision-makers' preferences are close to the organization's objective with respect to the decision they are in charge of but far from the organization's objective for the other decisions.
Subjects: 
Authority
Decision Rights
Incomplete Contracts
JEL: 
D23
D86
L23
ISBN: 
3938369582
Document Type: 
Working Paper

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