Need to Know? On Information Systems in Firms

Suzanne Bijkerk (), Josse Delfgaauw, Vladimir Karamychev and Otto (O.H.) Swank ()
Additional contact information
Suzanne Bijkerk: Erasmus School of Economics
Otto (O.H.) Swank: Erasmus School of Economics

No 18-091/VII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: In the context of firm decision-making, several motives for acquiring and conveying information exist. Information serves to make better decisions, to persuade, and to impress. In this paper, we study how these motives shape incentives to acquire and communicate information. We employ a cheap-talk model with information acquisition and communication by a firm's executive. The executive wants to accurately inform an internal decision-maker regarding the value of an opportunity, but has an incentive to overstate this value to persuade or impress external parties. We show that information acquisition and communication interact. The executive's impression and persuasion motives yield limited distortions in communication, if any. Instead, they reduce information acquisition. Furthermore, we find that for firms, transparent communication is a necessary evil. Transparency allows for influential communication to external parties, but constrains internal communication. Theoretically, we contribute by showing that the forward induction refinement excludes babbling as an equilibrium outcome if non-babbling equilibria exist.

Keywords: Information system; Information acquisition; Cheap-talk; Transparency; Firm behavior (search for similar items in EconPapers)
JEL-codes: D21 D83 (search for similar items in EconPapers)
Date: 2018-11-20
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/18091.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20180091

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().