Innis Lecture: Can the Theory of Incentives Explain Decentralization?

Cahier 2000-13

POITEVIN, Michel

Innis Lecture 2000 : Can the Theory of Incentives

Explain Decentralization?

Département de sciences économiques Université de Montréal

Faculté des arts et des sciences C.P. 6128, succursale Centre-Ville Montréal (Québec) H3C 3J7 Canada http://www.sceco.umontreal.ca SCECO-information@UMontreal.CA Téléphone : (514) 343-6539 Télécopieur : (514) 343-7221

Ce cahier a également été publié par le Centre interuniversitaire de recherche en économie quantitative (CIREQ) sous le numéro 14-2000.

This working paper was also published by the Center for Interuniversity Research in Quantitative Economics (CIREQ), under number 14-2000.

CAHIER 2000-13 INNIS LECTURE 2000 :

CAN THE THEORY OF INCENTIVES EXPLAIN DECENTRALIZATION?

Michel POITEVIN1

1

Centre de recherche et développement en économique (C.R.D.E.) and Département de sciences économiques, Université de Montréal, and CIRANO

September 2000

__________________

The author would like to thank Chuck Blackorby for giving him the opportunity to deliver the 2000 Innis Lecture (Canadian Economics Association, Vancouver, June 2000), he greatly benefited from this exercise. He would also like to thank Frédérique Fell for her valuable research assistance. The author acknowledges financial support from CRSH (Canada) and FCAR (Québec).

RÉSUMÉ

Cet article présente, dans un cadre unifié, un survol de trois théories de la décentralisation de la prise de décision dans les organisations. Ces théories reposent sur la présence d'information privée et des incitations qui en découlent. La renégociation, la collusion et les limites à la communication représentent trois conditions suffisantes pouvant expliquer l'optimalité de la décentralisation.

Mots clés : design organisationnel, information privée, décentralisation

ABSTRACT

This survey presents within a single model three theories of decentralization of decision-making within organizations based on private information and incentives. Renegotiation, collusion, and limits on communication are three sufficient conditions for decentralization to be optimal.

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