53 Pages Posted: 14 Jul 2006
Date Written: June 2006
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.
Keywords: authority, delegation, incentives
JEL Classification: M50, D23, L22
Suggested Citation: Suggested Citation
Matsusaka, John G. and Marino, Anthony M. and Zabojnik, Jan, Disobedience and Authority (June 2006). USC CLEO Research Paper No. C06-11. Available at SSRN: https://ssrn.com/abstract=914106 or http://dx.doi.org/10.2139/ssrn.914106