Empiriceme · Model · Theory / Model

Aghion–Tirole Formal vs. Real Authority

Delegation works when information and initiative sit with agents.

A head office can hold formal authority while the person on the ground holds real authority, because they have the information. Overruling them too often teaches them to stop gathering it.

In practice

  • A regional manager holds the authority to approve the layout, but the store staff know which aisle floods in the rain, so their sketch becomes the plan.
  • Head office sets the reporting template; the two analysts who understand the data decide what the fields mean.
Subject
Organizations & Bureaucracy
Essay
Why organisations learn, harden and decline

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