ON THE OPTIMAL COORDINATION OF UNINFORMED AGENTS BY AN INFORMED PRINCIPAL

Sudhir A. Shah
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Sudhir A. Shah: Delhi School of Economics

No 147, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: We consider organizations with a single principal and many agents who interact in an environment with the following features -- (a) Nature im-perfectly informs the principal via a state-contingent signal, but not the agents, about the state of the world, (b) the principal selectively shares this information with the agents, thereby endogenously endow-ing them with private information that is coarser than his own, (c) the principal assigns action spaces to the agents, and (d) an agent’s control over the choice from his assigned action space is inalienable. Designing an organization involves specifying (c) and specifying an information dissemination system for implementing (b). Searching for an optimal design involves (1) deriving optimal performance from each design, and (2) comparing designs on the basis of their best performances. Our ex-istence results show the feasibility of performing Step (1) in a large class of cases.

Keywords: Existence theorems; optimal design; team; organization; principal-agent model (search for similar items in EconPapers)
JEL-codes: C62 D02 D23 D82 L23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006-08
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-mic
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