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Information, authority, and smooth communication in organizations

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  • Szalay, DezsÅ‘
  • Deimen, Inga

Abstract

Two divisions of a firm, overarched by a headquarters, are engaged in a decision problem. Division one obtains information and informs division two who has the formal authority to make the decision. Headquarters guides the decision process by affecting the quality of information that division one obtains. In equilibrium, division one honestly communicates the inferences drawn from its observations, but not the underlying observations themselves and division two takes the advice at face value. The communication equilibrium involves smooth strategies and is outcome equivalent to delegation: the informed party gets its way, regardless of the allocation of formal authority.

Suggested Citation

  • Szalay, DezsÅ‘ & Deimen, Inga, 2015. "Information, authority, and smooth communication in organizations," CEPR Discussion Papers 10969, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10969
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    References listed on IDEAS

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    Cited by:

    1. Inga Deimen & Dezső Szalay, 2019. "Delegated Expertise, Authority, and Communication," American Economic Review, American Economic Association, vol. 109(4), pages 1349-1374, April.
    2. Gesche, Tobias, 2021. "De-biasing strategic communication," Games and Economic Behavior, Elsevier, vol. 130(C), pages 452-464.

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    More about this item

    Keywords

    Authority; Delegation; Endogenous information; Strategic communication;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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