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Information Gathering in Organizations: Equilibrium, Welfare, and Optimal Network Structure

Antoni Calvó-Armengol and Joan de Martí Beltran

Journal of the European Economic Association, 2009, vol. 7, issue 1, 116-161

Abstract: We model an organization as a game in which all agents share a common decision problem and some level of coordination is necessary between individual actions. Agents have individual private information concerning the task they have to perform, and they share this private information through pairwise channels of communication. We analyze how this communication pattern, modeled by means of a network structure, affects individual behavior and aggregate welfare. In the unique equilibrium of this Bayesian game, each agent's optimal action depends on a properly defined knowledge index that measures how the aggregation of information helps him to infer higher-order beliefs about other's information after communication. Adding communication channels is not always beneficial for the organization because it can lead to mis-coordination. We single out the geometry of interagent communication links that the manager could implement in order to improve the organization's performance.

JEL-codes: D82 D83 G14 (search for similar items in EconPapers)
Date: 2009
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Journal of the European Economic Association is currently edited by Xavier Vives, George-Marios Angeletos, Orazio P. Attanasio, Fabio Canova and Roberto Perotti

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