A principal-agent approach to a self-administered organization with an elected principal
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We consider a self-administered organization characterized by a principal elected by the agents of the organization. Conditions are established under which self-administration leads to either stronger or weaker incentives in comparison to an organization which only pursues exogenous objectives. While the output of the organization is controlled by the effort of the agents and by nature, the pay-off of the principal also includes rents from office. Generally, two different contractual regimes can be observed: either a hard regime with strong incentives and low fixed payments, or a soft regime with weak incentives and high fixed payments.
KeywordsSelf-administration Public organization Moral hazard Probabilistic voting
JEL ClassificationD23 D73 H41 L32
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