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Organizational Languages

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  • Birger Wernerfelt

Abstract

This paper is concerned with communication within a team of players trying to coordinate in response to information dispersed among them. The problem is nontrivial 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 compatibility advantages by using identical codes and that this can support the existence of several, more or less efficient, symmetric equilibria. Asymmetric equilibria may exist only if coordination across different sets of members is of sufficiently different importance. 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. Copyright 2004 Blackwell Publishing, 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK..

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Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 13 (2004)
Issue (Month): 3 (09)
Pages: 461-472

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Handle: RePEc:bla:jemstr:v:13:y:2004:i:3:p:461-472
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  1. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
  2. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  3. 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.
  4. 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.
  5. Ariel Rubinstein, 2000. "Economics and Language," Online economics textbooks, SUNY-Oswego, Department of Economics, number lang1, September.
  6. 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.
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  8. Ramey, Garey & Watson, Joel, 2000. "Conditioning Institutions and Renegotiation," University of California at San Diego, Economics Working Paper Series qt5zd216tw, Department of Economics, UC San Diego.
  9. 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.
  10. 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.
  11. Dow, James, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 1-14, January.
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  13. Joseph Farrell., 1986. "Meaning and Credibility in Cheap-Talk Games," Economics Working Papers 8609, University of California at Berkeley.
  14. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  15. 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.
  16. 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.
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Cited by:

  1. Jacques Crémer & Luis Garicano & Andrea Prat, 2007. "Language and the Theory of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 373-407, 02.
  2. 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.
  3. Blume, Andreas, 1998. "Coordination and Learning with a Partial Language," Working Papers 98-11, University of Iowa, Department of Economics.
  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).
  5. Crémer, Jacques & Garicano, Luis & Prat, Andrea, 2003. "Codes in Organizations," IDEI Working Papers 172, Institut d'Économie Industrielle (IDEI), Toulouse, revised Feb 2005.

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