Download or read book Formal Authority Versus Power in Profit Maximizing Organizations (Classic Reprint) written by Julio J. Rotemberg and published by . This book was released on 2015-08-05 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from Formal Authority Versus Power in Profit Maximizing Organizations I consider a setup in which the firm generally wishes to follow the wishes of individuals (or groups) with large amounts of specific human capital even if their willingness to pay for decisions is less than that of others. Thus, these individuals have power over decisions. In a situation where costly communication prevents the owner of the firm from knowing the valuations employees attach to all decisions, the owner will give formal authority to one individual (or group). I show that, as long as individuals have the possibility of protesting against decisions they do not like, it may be profit maximizing to give this formal authority to someone other than the powerful individual. The reason is that the threat of formal protests by powerful individuals is more effective as a check on the discretion of the person endowed with formal authority. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.