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Communication and behavior in organizations: An experiment

Piotr Evdokimov () and Umberto Garfagnini

Discussion Papers, Research Unit: Economics of Change from WZB Berlin Social Science Center

Abstract: We design a laboratory experiment to study behavior in a multidivisional organization facing a trade-off between coordinating its decisions across the divisions and meeting division-specific needs that are known only to the division managers. The managers communicate their private information through cheap talk. While the results show close to optimal communication, we also find systematic deviations from optimal behavior in how the communicated information is used. Specifically, subjects' decisions show worse than predicted adaptation to the needs of the divisions in decentralized organizations and worse than predicted coordination in centralized organizations. We show that the observed deviations disappear when uncertainty about the divisions' local needs is removed and discuss the possible underlying mechanisms.

Keywords: communication; coordination; decentralization; experiment (search for similar items in EconPapers)
JEL-codes: C70 C92 D03 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cbe and nep-exp
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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Journal Article: Communication and behavior in organizations: An experiment (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbeoc:spii2018302

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