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On Transparency in Organizations

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  • Philippe Jehiel

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

When is it best for the Principal to commit to not disclosing all that he/she knows in moral hazard interactions? I show that whenever the Agent would choose the same action under complete information at several distinct states, then full transparency can generically be improved upon. This implies that full transparency is generically suboptimal whenever the dimension of the information held by the Principal exceeds the dimension of the Agent's action. In a simple class of problems, I make further progress on the best disclosure policy assuming the Principal can either disclose fully the state or remain silent.

Suggested Citation

  • Philippe Jehiel, 2015. "On Transparency in Organizations," Post-Print halshs-01313694, HAL.
    • Handle: RePEc:hal:journl:halshs-01313694
    DOI: 10.1093/restud/rdu040
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    References listed on IDEAS

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    1. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
    2. Abreu, Dilip & Milgrom, Paul & Pearce, David, 1991. "Information and Timing in Repeated Partnerships," Econometrica, Econometric Society, vol. 59(6), pages 1713-1733, November.
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