Much of the focus on non-standard preferences in organizational economics has been on the preferences of agents. Preferences of supervisors may be more important, as they influence the actions of agents directly. To investigate the importance of supervisory preferences we develop a principal-supervisor-agent hierarchy in which the agent performs multiple tasks and can be incentivized using an imperfect aggregate performance measure. Additionally the agent can be subjectively monitored by the supervisor. The supervisor may authorize the payment of a bonus from the principal to the agent, giving him discretionary power over the agent. We show that if the supervisor has preferences for either task the supervisor’s (ab)use of authority may be beneficial to the principal. This is true if the supervisor prefers the task that the verifiable performance measure puts relatively little weight on, regardless of the strength of the supervisor’s preferences.
DEC202012
Biased Supervision
PhD Lunch Seminars Rotterdam
- Speaker(s)
- Michiel Souverijn (ESE, EUR)
- Date
- 2012-12-20
- Location
- Rotterdam