Explicit and Latent Authority in Hierarchical Organizations

Tinbergen Institute Discussion Paper No. 2003-102/1

42 Pages Posted: 8 Jun 2004

See all articles by René van den Brink

René van den Brink

VU University Amsterdam - Department of Economics; Tinbergen Institute; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Robert P. Gilles

Queen's University Management School

Date Written: December 2003

Abstract

In this paper we consider the problem of the control of access to a firm's productive asset, embedding the relevant decision makers into a general structure of formal authority relations. Within such an authority structure, each decision maker acts as a principal to some decision makers, while she acts as an agent in relation to certain other decision makers. We study under which conditions decision makers decide to exercise their own authority and to accept their superiors' authority.

We distinguish two types of behavior within such an authority situation. First, we investigate a non-cooperative equilibrium concept describing the explicit, myopic exercise of authority. We find that if monitoring costs are sufficiently small, such explicit authority is exercised fully.

Second, we consider the possibility of subordinates to submit themselves to authority even though such authority is not enforced explicitly. Again for sufficiently small monitoring costs such latent authority can be supported as an equilibrium.

Keywords: Cooperative games, Hierarchies, Social situations, Authority

JEL Classification: C71, C79, D23, L23

Suggested Citation

van den Brink, J.R. (René) and Gilles, Robert P., Explicit and Latent Authority in Hierarchical Organizations (December 2003). Tinbergen Institute Discussion Paper No. 2003-102/1. Available at SSRN: https://ssrn.com/abstract=482484 or http://dx.doi.org/10.2139/ssrn.482484

J.R. (René) Van den Brink (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Robert P. Gilles

Queen's University Management School ( email )

25 University Sq
Belfast, Northern Ireland BT7 1NN
United Kingdom

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