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Full Disclosure in Decentralized Organizations

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Author Info

  • Jeanne Hagenbach

    (Ecole Polytechnique - Ecole Polytechnique)

  • Frédéric Koessler

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

We characterize sufficient conditions for full and decentralized disclosure of hard information in organizations with asymmetrically informed and self interested agents with quadratic loss functions. Incentive conflicts arise because agents have different (and possibly interdependent) ideal actions and different incentives to coordinate with each others. A fully revealing sequential equilibrium exists in the disclosure game if each player's ideal action is monotonic in types and types are independently distributed, but may fail to exist with non-monotonic ideal actions or correlated types. When biases between players' ideal actions are constant across states, complete information is the Pareto dominant information structure. In that case, there is a fully revealing sequential equilibrium in which informational incentive constraints are satisfied ex-post, so it exists for all possible prior beliefs, even when players' types are correlated. This existence result applies whether information disclosure is private or public, and is extended to partial certifiability of information.

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File URL: http://halshs.archives-ouvertes.fr/docs/00/65/22/79/PDF/wp201141.pdf
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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00652279.

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Date of creation: Dec 2011
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Handle: RePEc:hal:wpaper:halshs-00652279

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00652279
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Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: Certifiable types ; Coordination ; Information disclosure ; Multi-divisional organizations;

This paper has been announced in the following NEP Reports:

References

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  1. Andrea Galeotti & Christian Ghiglino & Francesco Squintani, 2009. "Strategic Information Transmission in Networks," Economics Discussion Papers 668, University of Essex, Department of Economics.
  2. Mathis, Jérôme, 2008. "Full revelation of information in Sender-Receiver games of persuasion," Journal of Economic Theory, Elsevier, vol. 143(1), pages 571-584, November.
  3. Maria Goltsman & Gregory Pavlov, 2008. "How to Talk to Multiple Audiences," UWO Department of Economics Working Papers 20081, University of Western Ontario, Department of Economics.
  4. Monic Sun, 2011. "Disclosing Multiple Product Attributes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 195-224, 03.
  5. Farrell, J. & Gibbons, R., 1989. "Cheap Talk With Two Audiences," Working papers 518, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Van Zandt, Timothy & Vives, Xavier, 2003. "Monotone Equilibria in Bayesian Games of Strategic Complementarities," CEPR Discussion Papers 4103, C.E.P.R. Discussion Papers.
  7. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  8. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  9. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Giovannoni, Francesco & Seidmann, Daniel J., 2007. "Secrecy, two-sided bias and the value of evidence," Games and Economic Behavior, Elsevier, vol. 59(2), pages 296-315, May.
  11. Frederic Koessler, 2006. "Lobbying with Two Audiences: Public vs Private Certification," THEMA Working Papers 2006-12, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  12. Farrell, J. & Gibbons, R., 1989. "Cheap Talk With Two Audiences," Working Papers e-89-7, Hoover Institution, Stanford University.
  13. Christian Hellwig & Laura Veldkamp, 2009. "Knowing What Others Know: Coordination Motives in Information Acquisition," Review of Economic Studies, Wiley Blackwell, vol. 76(1), pages 223-251, 01.
  14. Dessein, Wouter, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 811-38, October.
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Citations

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Cited by:
  1. Jeanne Hagenbach & Frédéric Koessler & Eduardo Perez-Richet, 2012. "Certifiable Pre-Play Communication: Full Disclosure," PSE Working Papers hal-00753473, HAL.

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