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The Design of Information Acquisition and Sharing

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  • Dimitri Migrow
  • Francesco Squintani

Abstract

This paper investigates the optimal design of linear compensation schemes that incentivize information acquisition and sharing in multidivisional organizations. When the information shared between divisions is highly correlated and the information acquisition costs are not too high, the optimal strategy for the headquarters manager is to implement a compensation scheme that links the remuneration of each division to the performance of the other division. However, if the information is weakly correlated or the cost of acquisition is prohibitively high, the most effective incentive is to tie each manager’s remuneration solely to the performance of their own division.

Suggested Citation

  • Dimitri Migrow & Francesco Squintani, 2023. "The Design of Information Acquisition and Sharing," Journal of Political Economy Microeconomics, University of Chicago Press, vol. 1(4), pages 710-745.
    • Handle: RePEc:ucp:jpemic:doi:10.1086/726580
    DOI: 10.1086/726580
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