Information Sharing between Vertical Hierarchies

Marco Pagnozzi and Salvatore Piccolo ()

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: When do principals independently choose to share the information obtained from their privately informed agents? Information sharing affects contracting within competing organizations and induces agents’ strategies to be correlated through the distortions imposed by principals to obtain information. We show that the incentives to share information depend on the nature of upstream externalities between principals and the correlation of agents’ information. With small externalities, principals share information when externalities and correlation have opposite signs, and do not share information when externalities and correlation have the same sign. In this second case, principals face a prisoners’ dilemma since they obtain higher profits by sharing information.

Keywords: communication; information sharing; adverse selection; vertical hierarchies (search for similar items in EconPapers)
JEL-codes: D43 D82 L14 (search for similar items in EconPapers)
Date: 2012-10-03
New Economics Papers: this item is included in nep-cta and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Games and Economic Behavior, 2013, vol. 79, pp. 201–222

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Journal Article: Information sharing between vertical hierarchies (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:322

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