Truth Be Told An Experimental Study of Communication and Centralization

David Cooper () and Jordi Brandts

No 1046, Working Papers from Barcelona School of Economics

Abstract: We study the tradeoffs between centralized and decentralized management using a new experimental game, the decentralization game. Product types for two divisions are either chosen independently by the divisions (decentralization) or imposed by a central manager (centralization). Centralization makes it easier to coordinate the divisions' product types but more difficult to take advantage of the divisions' private information. We find that total surplus is highest when centralization is combined with free-form chat between the three players. This high performance occurs because divisions almost never lie about their private information, yielding unambiguous transmission of information from divisions to the central manager.

Keywords: experiments; asymmetric Information; Coordination; organizations (search for similar items in EconPapers)
JEL-codes: C92 D23 J31 L23 M52 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-exp and nep-hpe
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Citations: View citations in EconPapers (7)

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