Allocation of Authority when a Person is not a Robot

Li, Jianpei and Wu, Yanhui (July 2007): Allocation of Authority when a Person is not a Robot. SFB/TR 15 Discussion Paper No. 211

Abstract

We formalize a conception of authority, which is commonly defined as the right of controlling a person’s actions embedded in human assets in sociology. Due to the inalienable property of human assets, the contractible formal authority is hard to verify and enforce, while real authority usually diverges from formal authority. Inefficiency tends to arise when a task is not routine or can not be done by a robot. Using a framework of incomplete contract, we show that allocation of formal authority, as an instrument to mitigate the inefficiency, is determined by features of tasks and specificity of assets, and the relationship between the resources. Monitoring is then introduced to fine tune value of delegation.

• Item Type: Paper (Discussion Paper)
• Keywords: Transaction of human assets, real authority, formal authority, delegation, monitor
• Collections: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A7 - Auktionen, Anreizprobleme und Wettbewerb; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B5 - Weltwirtschaftliche Integration und die neue Firmenorganisation
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: D23, J24, J41, L22
• Language: English