Aggregate Information and Organizational Structures

Gorkem Celik, Dongsoo Shin and Roland Strausz
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Dongsoo Shin: Santa Clara University

No 356, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: We study information flows in an organization with a top management (principal) and multiple subunits (agents) with private information that determines the organization's aggregate efficiency. Under centralization, eliciting the agents' private information may induce the principal to manipulate aggregate information, which obstructs an effective use of information for the organization. Under delegation, the principal concedes more information rent, but is able to use the agents' information more effectively. The trade-off between the organizational structures depends on the likelihood that the agents are efficient. Centralizing information flows is optimal when such likelihood is low. Delegation, by contrast, is optimal when it is high.

Keywords: agency; aggregate information; organization design (search for similar items in EconPapers)
JEL-codes: D86 L23 L25 (search for similar items in EconPapers)
Date: 2022-12-27
New Economics Papers: this item is included in nep-gth, nep-ind and nep-mic
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Related works:
Journal Article: Aggregate Information and Organizational Structures (2023)
Working Paper: Aggregate Information and Organizational Structures (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:356

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