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Aggregate Information and Organizational Structures

Author

Listed:
  • Celik, Gorkem

    (ESSEC Business School)

  • Shin, Dongsoo

    (Santa Clara University)

  • Strausz, Roland

    (Humboldt Universität zu Berlin)

Abstract

We study an organization with a top management (principal) and multiple subunits (agents) with private information that determine the organization\'s aggregate efficiency. Under centralization, eliciting the agents\' private information may induce the principal to manipulate aggregate information, which obstructs an effective use of information for the organization. Under delegation, the principal concedes more information rent, but is able to use the agents\' information more effectively. The trade-off between the organizational structures depends on the likelihood that the agents are efficient. Centralization is optimal when such likelihood is low. Delegation, by contrast, is optimal when it is high.

Suggested Citation

  • Celik, Gorkem & Shin, Dongsoo & Strausz, Roland, 2018. "Aggregate Information and Organizational Structures," Rationality and Competition Discussion Paper Series 105, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:105
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    More about this item

    Keywords

    agency; aggregate information; organization design;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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