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Information Aggregation and Countervailing Biases in Organizations

Saori Chiba and Kaiwen Leong

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: A decision maker relies on an agent for decision-relevant information. We consider two dimensions of biases—one over projects (project bias) often assumed in cheap talk models à la Crawford and Sobel (1982) and the other over the outside option (pandering bias) scrutinized in Che, Dessein and Kartik (2013). The two biases counteract each other. This effect is more significant as payoffs to different projects are more highly negatively correlated. As a result, a larger project bias can facilitate cheap talk communications and benefit the players. Due to this correlation-driven countervailing biases, the comparison between vetobased delegation and non-delegation is not trivial.

Keywords: Bias; Cheap Talk; Correlation; Outside Option. (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme, nep-mic and nep-ppm
Date: 2018-10
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