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On The Optimal Coordination Of Uninformed Agents By An Informed Principal

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  • Sudhir A. Shah

    (Delhi School of Economics)

Abstract

We consider organizations with a single principal and many agents who interact in an environment with the following features -- (a) Nature im-perfectly informs the principal via a state-contingent signal, but not the agents, about the state of the world, (b) the principal selectively shares this information with the agents, thereby endogenously endow-ing them with private information that is coarser than his own, (c) the principal assigns action spaces to the agents, and (d) an agent’s control over the choice from his assigned action space is inalienable. Designing an organization involves specifying (c) and specifying an information dissemination system for implementing (b). Searching for an optimal design involves (1) deriving optimal performance from each design, and (2) comparing designs on the basis of their best performances. Our ex-istence results show the feasibility of performing Step (1) in a large class of cases.

Suggested Citation

  • Sudhir A. Shah, 2006. "On The Optimal Coordination Of Uninformed Agents By An Informed Principal," Working papers 147, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:147
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    References listed on IDEAS

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    More about this item

    Keywords

    Existence theorems; optimal design; team; organization; principal-agent model;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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