The Delegation of Decision Rights: An Experimental Investigation

Despite the benefits of delegation, anecdotal and survey-based evidence suggests that firms do not optimally delegate decision- making authority. However, to date, no quantifiable evidence supports this claim. We design an experiment to explore the superior’s choice between delegation and information elicitation. We also examine the effect of this choice on the subordinates’ incentives to gather decision facilitating information. We find that, compared to agency theory predictions, superiors delegate less often than they should. Subordinates exert lower effort when superiors elicit information than when superiors delegate the decision to them. As a result, superiors earn lower profit when they choose to elicit information instead of delegating decision-making authority.

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