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Author Info
Wernerfelt, Birger

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Abstract

The paper is concerned with communication within a team of players trying to coordinate in response to information dispersed among them. The problem is non-trivial because they cannot communicate all information instantaneously, but have to send longer or shorter sequences of messages, using coarse codes. We focus on the design of these codes and show that members may gain comaptibility advantages by using identical codes, and that this can support the existence of several, more or less efficient, symmetric equilibria. Asymmetric eqilibria exist if coordination across different sets of members is of differing importance, and fewer symmetric equilibria exist if the members' local environments are sufficiently heterogeneous. The results are consistent with the stylized fact that firms differ even within industries, and that coordination between divisions is harder than coordination inside divisions.

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File URL: http://hdl.handle.net/1721.1/1812
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Publisher Info
Paper provided by Massachusetts Institute of Technology (MIT), Sloan School of Management in its series Working papers with number 4278-03.

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Date of creation: 03 Feb 2003
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Handle: RePEc:mit:sloanp:1812

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rabin, Matthew & Sobel, Joel, 1996. "Deviations, Dynamics, and Equilibrium Refinements," Journal of Economic Theory, Elsevier, vol. 68(1), pages 1-25, January. [Downloadable!] (restricted)
    Other versions:
  2. Rubinstein, A., 1998. "Economics and Language," Papers 14-98, Tel Aviv.
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  3. Rubinstein, Ariel, 1996. "Why Are Certain Properties of Binary Relations Relatively More Common in Natural Language?," Econometrica, Econometric Society, vol. 64(2), pages 343-55, March. [Downloadable!] (restricted)
  4. Meyer, Margaret A, 1991. "Learning from Coarse Information: Biased Contests and Career Profiles," Review of Economic Studies, Blackwell Publishing, vol. 58(1), pages 15-41, January. [Downloadable!] (restricted)
  5. Bolton, Patrick & Dewatripont, Mathias, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 809-39, November. [Downloadable!] (restricted)
  6. Kofman, Fred & Ratliff, James D., 1996. "Monolog vs. dialog in costly bilateral communication," Journal of Economic Behavior & Organization, Elsevier, vol. 31(3), pages 431-443, December. [Downloadable!] (restricted)
  7. Garey Ramey & Joel Watson, 1999. "Conditioning Institutions and Renegotiation," University of California at San Diego, Economics Working Paper Series 99-09, Department of Economics, UC San Diego. [Downloadable!]
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  8. Timothy Van Zandt & Roy Radner, 1998. "Real-Time Decentralized Information Processing and Returns to Scale," Discussion Papers 1233, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  9. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  10. Duncan Simester & Marc Knez, 2002. "Direct and Indirect Bargaining Costs and the Scope of the Firm," Journal of Business, University of Chicago Press, vol. 75(2), pages 283-304, April. [Downloadable!]
  11. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  12. Dow, James, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Blackwell Publishing, vol. 58(1), pages 1-14, January. [Downloadable!] (restricted)
  13. Wernerfelt, Birger, 1997. "On the Nature and Scope of the Firm: An Adjustment-Cost Theory," Journal of Business, University of Chicago Press, vol. 70(4), pages 489-514, October. [Downloadable!] (restricted)
  14. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October. [Downloadable!] (restricted)
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  15. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. CRÉMER, Jacques & GARICANO, Luis & PRAT, Andrea, 2003. "Codes in Organizations," IDEI Working Papers 172, Institut d'Économie Industrielle (IDEI), Toulouse, revised Feb 2005. [Downloadable!]
    Other versions:
  2. Andreas Blume, 1998. "Coordination and Learning with a Partial Language," CIG Working Papers FS IV 98-11, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
  3. Nicolai J. Foss, . "Edith Penrose and the Penrosians - or, why there is still so much to learn from The Theory of the Growth of the Firm," IVS/CBS Working Papers 98-1, Department of Industrial Economics and Strategy, Copenhagen Business School. [Downloadable!]
  4. Hirokazu Takizawa, 2003. "Coordination Costs and the Optimal Partition of a Product Design," Discussion papers 03014, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
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