We discuss the social welfare improvement under centralized and decentralized hierarchies and focus on supervisoris ability to monitor quality. Although the possibility of collusion against the principal is eliminated under decentralized hierarchy, the decentralization is dominating only if...

We consider resource allocation within an organisation when agents have a preference for autonomy and show how delegation bears on moral hazard and adverse selection. Agents may care about autonomy for reasons of job-satisfaction, status or greater reputation of perform-ance under autonomy....

We consider resource allocation within an organisation and show how delegation bears on moral hazard and adverse selection when agents have a preference for autonomy. Agents may care about autonomy for reasons of job-satisfaction, status or greater reputation when performing well under autonomy....