Question D Taking the Aghion and Tirole (1997) model as a starting point, this question requires you to develop your ow

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Question D

Taking the Aghion and Tirole (1997) model as a starting point, this
question requires you
to develop your own economic model of decision making.

1. First, identify a tradeoff between decentralisation (or
delegation) and
centralisation.
2. Develop an economic model that captures these tradeoffs.
3. Solve the model and provide some economic intuition for the
results.
4. Relate the predictions of your model to the current
literature on the optimal
allocation of decision-making rights in the literature
Background reading for Question D

Aghion, P. and J. Tirole 1997, ‘Formal and real authority in
organizations’, Journal of
Political Economy, vol. 105, no. 1, pp. 1-29.

M. Colombo and M. Delmastro 2008, The Economics of Organizational
Design: Theoretical
Insights and Empirical Evidence, Palgrave MacMillan, Hampshire UK,
Chapter 2.