A common agency within bureaucracy
We explore the welfare implications of multiple principals in the top level of bureaucracy. An agent has to carry out two separate tasks, which can either be organized by two separate principals, or combined under one principal. The relationship between the top level (the principals) and the lower l...
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2016-06-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1183.pdf
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| Summary: | We explore the welfare implications of multiple principals in the top level of
bureaucracy. An agent has to carry out two separate tasks, which can either be organized
by two separate principals, or combined under one principal. The relationship between the
top level (the principals) and the lower level (agent) of bureaucracy is a “principal-agent
problem”. The presence of multiple principals generates a “common agency”. We show
that the optimal bureaucratic structure depends on the existence of rents from office: the
two systems produce equally welfare-efficient outcomes if there are no rents, a singleprincipal
model dominates common agency otherwise. |
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| ISSN: | 1841-8678 1844-0029 |