Information, Production Decisions, and Intra-firm Bargaining

Gregory Dow

International Economic Review, 1988, vol. 29, issue 1, 57-79

Abstract: A firm's factor suppliers often receive private signals which are useful in managerial decision making. Productive efficiency requires the pooling of such decentralized information. However, factor suppliers may threaten to withhold private signals in order to secure side payments from the potential beneficiaries of this information. J. Harsanyi's theory of the n-person cooperative game is applied to a model where both physical inputs and information can be withheld by factor owners. For the special case of a binary decision problem, the central limit theorem is used to approximate the Harsanyi solution by a linear combination of are as under the standard normal curve. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1988
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