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Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns

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  • Otto H. Swank
  • Bauke Visser

Abstract

We examine centralized versus decentralized decision making when experience of agents is private information and communication is necessary to learn from others. An agent has reputational concerns and his market may or may not observe what the other agent chooses (global versus local markets). With decentralized decision making, agents' willingness to communicate depends heavily on what a market observes. Strikingly, less communication may improve welfare. If markets are global, centralization outperforms decentralization as it makes communication possible, and communication is informative for any finite degree of conflict among agents and with the center. (JEL D60, D82, D83)

Suggested Citation

  • Otto H. Swank & Bauke Visser, 2015. "Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 109-149, November.
    • Handle: RePEc:aea:aejmic:v:7:y:2015:i:4:p:109-49
    Note: DOI: 10.1257/mic.20130146
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    References listed on IDEAS

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    Cited by:

    1. Suzanne Bijkerk & Josse (J.) Delfgaauw & Vladimir (V.A.) Karamychev & Otto (O.H.) Swank, 2018. "Need to Know? On Information Systems in Firms," Tinbergen Institute Discussion Papers 18-091/VII, Tinbergen Institute.
    2. Aleksei Smirnov & Egor Starkov, 2024. "Designing Social Learning," Papers 2405.05744, arXiv.org, revised May 2024.

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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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