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Dynamic coordination via organizational routines

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Author Info

  • Andreas Blume

    (University of Pittsburgh)

  • April M. Franco

    (Rotman School of Management, University of Toronto)

  • Paul Heidhues

    (ESMT European School of Management and Technology)

Abstract

We investigate dynamic coordination among members of a problem-solving team who receive private signals about which of their actions are required for a (static) coordinated solution and who have repeated opportunities to explore different action combinations. In this environment ordinal equilibria, in which agents condition only on how their signals rank their actions and not on signal strength, lead to simple patterns of behavior that have a natural interpretation as routines. These routines partially solve the team's coordination problem by synchronizing the team's search efforts and prove to be resilient to changes in the environment by being ex post equilibria, to agents having only a coarse understanding of other agents' strategies by being fully cursed, and to natural forms of agents' overconfidence. The price of this resilience is that optimal routines are frequently suboptimal equilibria.

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Bibliographic Info

Paper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-11-10.

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Length: 58 pages
Date of creation: 06 Sep 2011
Date of revision:
Handle: RePEc:esm:wpaper:esmt-11-10

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Keywords: coordination games; organizational routines; decentralized information; ex-post equilibria; cursed equilibria; multi-agent learning; rational learning;

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References

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  1. John Duffy & Andreas Blume & April Franco, 2007. "Decentralized Organizational Learning: An Experimental Investigation," Working Papers 310, University of Pittsburgh, Department of Economics, revised Jul 2008.
  2. Jacques Crémer & Luis Garicano & Andrea Prat, 2007. "Language and the Theory of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 373-407, 02.
  3. Andreas Blume & April Franco, 2002. "Learning from failure," Staff Report 299, Federal Reserve Bank of Minneapolis.
  4. Blume, Andreas & Franco, April Mitchell, 2007. "Decentralized learning from failure," Journal of Economic Theory, Elsevier, vol. 133(1), pages 504-523, March.
  5. Blume, Andreas & Heidhues, Paul, 2006. "Private monitoring in auctions," Journal of Economic Theory, Elsevier, vol. 131(1), pages 179-211, November.
  6. O. Gossner & N. Vieille, 2000. "Strategic Learning in Games with Symmetric Information," THEMA Working Papers 2000-27, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  7. Andreas Blume & John Duffy, 2004. "Organizational Learning: An Experimental Investigation," 2004 Meeting Papers 617, Society for Economic Dynamics.
  8. Thomas Wiseman, 2005. "A Partial Folk Theorem for Games with Unknown Payoff Distributions," Econometrica, Econometric Society, vol. 73(2), pages 629-645, 03.
  9. Sylvain Chassang, 2010. "Building Routines: Learning, Cooperation, and the Dynamics of Incomplete Relational Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 448-65, March.
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