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Organizational Languages

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  • Wernerfelt, Birger

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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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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  1. A. Rubinstein, 1999. "Economics and Language," Princeton Economic Theory Papers 00s6, Economics Department, Princeton University.
  2. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  3. Farrell, Joseph, 1986. "Meaning and Credibility in Cheap-Talk Games," Department of Economics, Working Paper Series qt4968n3fz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Dow, James, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 1-14, January.
  5. Mathias Dewatripont & Patrick Bolton, 1996. "The firm as a communication network," ULB Institutional Repository 2013/9597, ULB -- Universite Libre de Bruxelles.
  6. Wernerfelt, Birger, 1997. "On the Nature and Scope of the Firm: An Adjustment-Cost Theory," The Journal of Business, University of Chicago Press, vol. 70(4), pages 489-514, October.
  7. Duncan Simester & Marc Knez, 2002. "Direct and Indirect Bargaining Costs and the Scope of the Firm," The Journal of Business, University of Chicago Press, vol. 75(2), pages 283-304, April.
  8. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  9. 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.
  10. Meyer, Margaret A, 1991. "Learning from Coarse Information: Biased Contests and Career Profiles," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 15-41, January.
  11. Rabin, Matthew & Sobel, Joel, 1996. "Deviations, Dynamics, and Equilibrium Refinements," Journal of Economic Theory, Elsevier, vol. 68(1), pages 1-25, January.
  12. 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.
  13. Garey Ramey & Joel Watson, 1999. "Conditioning Institutions and Renegotiation," Cowles Foundation Discussion Papers 1225, Cowles Foundation for Research in Economics, Yale University.
  14. anonymous, 1978. "Communication," Management Science, INFORMS, vol. 24(9), pages 919-919, May.
  15. 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.
  16. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
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Cited by:
  1. Jacques Cremer & Luis Garicano & Andrea Prat, 2006. "Language and the Theory of the Firm," Levine's Bibliography 784828000000000373, UCLA Department of Economics.
  2. Hirokazu Takizawa, 2003. "Coordination Costs and the Optimal Partition of a Product Design," Discussion papers 03014, Research Institute of Economy, Trade and Industry (RIETI).
  3. Crémer, Jacques & Garicano, Luis & Prat, Andrea, 2004. "Codes in Organizations," CEPR Discussion Papers 4205, C.E.P.R. Discussion Papers.
  4. Blume, Andreas, 1998. "Coordination and Learning with a Partial Language," Working Papers 98-11, University of Iowa, Department of Economics.
  5. Marco LiCalzi & Nadia Mâagli, 2014. "Bargaining over a common conceptual space," Documents de travail du Centre d'Economie de la Sorbonne 14052, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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