Hierarchy and Authority in a Dynamic Perspective: A Model Applied to Donor Financing of NGO Proposals

July 1, 2003

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents a dynamic game of strategic delegation between a principal and an agent. The principal can choose between two organizational designs: a traditional hierarchy where she retains authority over the choice of projects to be implemented or a delegation where she allows her agent to select the project. The key objectives of this model are to identify the long-run determinants of the principal’s choice and verify the impact of the authority allocation on the agent’s effort levels and on the principal’s payoffs. We apply the model to the relationships between institutional donors and nongovernmental organizations.

Subject: Asset and liability management, Debt limits, Economic sectors, Financial institutions, Nongovernmental organizations, Project loans

Keywords: agent's choice, agent's effort, agent's expertise, agent's initiative, agent's preference, Debt limits, development aid, dynamic games, Eastern Europe, effort of the agent, hierarchies, NGOs, Nongovernmental organizations, principal-agent issues, principal-agent relationship, Project loans, strategic delegation, WP

Pages:
22
Volume:
2003
DOI:
https://doi.org/10.5089/9781451857511.001
Issue:
157
Series:
Working Paper No. 2003/157
Stock No:
WPIEA1572003
ISBN:
9781451857511
ISSN:
1018-5941

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