This paper offers a model to study the trade-off between the efficiency enhancements of information exchanges and the risk of information leakage in organizations. Information exchanges can be efficient since, in the absence of legal enforcement, the voluntary disclosure of personal information generates an endogenous enforcement device, and hence can promote cooperation. On the other hand, because of the presence of external threats (for instance, a competitor), too much information exchange can increase the risk of information leakage. I show that, when the external threat is relatively weak, egalitarian organizations are more likely to arise in equilibrium. When the external threat becomes more important, I find conditions under which in equilibrium hierarchical organizations arise as a compromise between internal and external efficiency
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Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number
71.
Length: Date of creation: 2004 Date of revision: Handle: RePEc:red:sed004:71
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