Disobedience and Authority
John G. Matsusaka
University of Southern California - Marshall School of Business; USC Gould School of Law
Anthony M. Marino
University of Southern California - Marshall School of Business
Queen's University - Department of Economics
USC CLEO Research Paper No. C06-11
This paper presents a theory of the allocation of authority in an organization in which centralization is limited by the agent's ability to disobey the principal. We show that workers are given more authority when they are costly to replace or do not mind looking for another job, even if they have no better information than the principal. The allocation of authority thus depends on external market conditions as well as the information and agency problems emphasized in the literature. Evidence from a national survey of organizations shows that worker autonomy is related to separation costs as the theory predicts.
Number of Pages in PDF File: 53
Keywords: authority, delegation, incentives
JEL Classification: M50, D23, L22
Date posted: July 14, 2006
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