No. 47: Delegation of job design and the value of communication with imperfect performance measurement

Abstract

We consider a multitask model with private, post-contract, pre-decision information and imperfect performance measurement and identify conditions under which the delegation of job design is preferred over centralization. A principal contracts with an agent who performs productive effort. After contracting, the agent becomes privately informed about his effort costs for performing one task. The principal can either decide centrally about the job design or delegate the decision whether to perform effort on this task to the agent. We find that delegation, although it entails a loss of control, can be preferred over centralization when the performance measure is incongruent. The principal may achieve a benchmark result with delegation that would be obtained with ex-ante observable effort costs. Moreover, we show that the benefit of communication in a centralized setting crucially depends on the nature of the congruity problem. Delegation may then be even preferred over communication-based centralization.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin und der Goethe-Universität Frankfurt, die die gleiche Forschungsagenda verfolgen.