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Accept or reject? An organizational perspective

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  • Garfagnini, Umberto
  • Ottaviani, Marco
  • Sørensen, Peter Norman

Abstract

This paper compares the relative performance of different organizational structures for the decision of accepting or rejecting a project of uncertain quality. When the principal is uninformed and relies on the advice of an informed and biased agent, cheap-talk communication is persuasive and it is equivalent to delegation of authority, provided that the agent's bias is small. When the principal has access to additional private information, cheap-talk communication dominates both (conditional) delegation and more democratic organizational arrangements such as voting with unanimous consensus.

Suggested Citation

  • Garfagnini, Umberto & Ottaviani, Marco & Sørensen, Peter Norman, 2014. "Accept or reject? An organizational perspective," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 66-74.
    • Handle: RePEc:eee:indorg:v:34:y:2014:i:c:p:66-74
    DOI: 10.1016/j.ijindorg.2014.03.004
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    References listed on IDEAS

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    Cited by:

    1. Silvia Dominguez Martinez & Randolph Sloof, 2016. "Communication versus (Restricted) Delegation: An Experimental Comparison," Tinbergen Institute Discussion Papers 16-050/VII, Tinbergen Institute.
    2. Danielle Li, 2017. "Expertise versus Bias in Evaluation: Evidence from the NIH," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 60-92, April.
    3. Bel, By Roland & Smirnov, Vladimir & Wait, Andrew, 2018. "Managing change: Communication, managerial style and change in organizations," Economic Modelling, Elsevier, vol. 69(C), pages 1-12.
    4. Katayama, Hajime & Meagher, Kieron J. & Wait, Andrew, 2018. "Authority and communication in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 315-348.
    5. Name-Correa, Alvaro J. & Yildirim, Huseyin, 2019. "Social pressure, transparency, and voting in committees," Journal of Economic Theory, Elsevier, vol. 184(C).
    6. Pavesi, Filippo & Scotti, Massimo, 2022. "Good lies," European Economic Review, Elsevier, vol. 141(C).
      • Filippo Pavesi & Massimo Scotti, 2019. "Good Lies," Working Paper Series 39, Economics Discipline Group, UTS Business School, University of Technology, Sydney.

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    More about this item

    Keywords

    Information; Cheap talk; Delegation; Voting;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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