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Communication Breakdown: Consultation or Delegation from an Expert with Uncertain Bias

Author

Listed:
  • Rush Anthony

    (Reserve Bank of Australia, rusha@rba.gov.au)

  • Smirnov Vladimir

    (University of Sydney, v.smirnov@econ.usyd.edu.au)

  • Wait Andrew

    (University of Sydney, a.wait@econ.usyd.edu.au)

Abstract

When communicating with an uninformed decision maker, the motives behind an expert's message are often unclear. To explore this and investigate its impact on organizational design, we extend the cheap-talk model of Crawford and Sobel (1982) to allow for uncertainty over the expert's bias. We find that, in contrast to Dessein (2002), it is possible that the decision maker prefers communication to delegation; that is, it can be optimal for a decision maker to retain control and to solicit advice from the expert.

Suggested Citation

  • Rush Anthony & Smirnov Vladimir & Wait Andrew, 2010. "Communication Breakdown: Consultation or Delegation from an Expert with Uncertain Bias," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-29, August.
    • Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:34
    DOI: 10.2202/1935-1704.1612
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    References listed on IDEAS

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    1. Li, Ming & Madarász, Kristóf, 2008. "When mandatory disclosure hurts: Expert advice and conflicting interests," Journal of Economic Theory, Elsevier, vol. 139(1), pages 47-74, March.
    2. Wouter Dessein, 2002. "Authority and Communication in Organizations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 811-838.
    3. Morgan, John & Stocken, Phillip C, 2003. "An Analysis of Stock Recommendations," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 183-203, Spring.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Bel, By Roland & Smirnov, Vladimir & Wait, Andrew, 2018. "Managing change: Communication, managerial style and change in organizations," Economic Modelling, Elsevier, vol. 69(C), pages 1-12.
    2. Silvia Dominguez Martinez & Randolph Sloof, 2016. "Communication versus (Restricted) Delegation: An Experimental Comparison," Tinbergen Institute Discussion Papers 16-050/VII, Tinbergen Institute.
    3. Garfagnini, Umberto & Ottaviani, Marco & Sørensen, Peter Norman, 2014. "Accept or reject? An organizational perspective," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 66-74.
    4. Katayama, Hajime & Meagher, Kieron J. & Wait, Andrew, 2018. "Authority and communication in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 315-348.

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