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Informational control and organizational design

  • Ivanov, Maxim

This paper focuses on issues of allocating authority between an uninformed principal and an informed expert. We analyze the benefits of informational control--restricting the precision of the expert's information (without learning its content). In this case, the result of Dessein (2002) [8] that delegating decisions to a perfectly informed expert is better than communication when preferences between the expert and the principal are not too far apart is reversed. We demonstrate that these organizational forms--informational control and delegation--can be either complements or substitutes, depending on the principal's ability to affect the expert's discretion about the set of allowed policies.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 2 (March)
Pages: 721-751

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:721-751
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
  2. Krishna, Vijay & Morgan, John, 2004. "Contracting for Information under Imperfect Commitment," Competition Policy Center, Working Paper Series qt4010c6w9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  3. Nahum D. Melumad & Toshiyuki Shibano, 1991. "Communication in Settings with No. Transfers," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 173-198, Summer.
  4. Marco Ottaviani & Francesco Squintani, 2006. "Naive audience and communication bias," International Journal of Game Theory, Springer, vol. 35(1), pages 129-150, December.
  5. Saak, Alexander E., 2006. "The optimal private information in single unit monopoly," Economics Letters, Elsevier, vol. 91(2), pages 267-272, May.
  6. Andreas Blume & Oliver Board & Kohei Kawamura, 2007. "Noisy Talk," ESE Discussion Papers 167, Edinburgh School of Economics, University of Edinburgh.
  7. Rogerson, William P, 1990. "Quality vs. Quantity in Military Procurement," American Economic Review, American Economic Association, vol. 80(1), pages 83-92, March.
  8. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
  9. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  10. Dirk Bergemann & Martin Pesendorfer, 2001. "Information Structures in Optimal Auctions," Cowles Foundation Discussion Papers 1323, Cowles Foundation for Research in Economics, Yale University.
  11. Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-27, May.
  12. Ricardo Alonso & Niko Matouschek, 2008. "Optimal Delegation," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 259-293.
  13. Kovác, Eugen & Mylovanov, Tymofiy, 2009. "Stochastic mechanisms in settings without monetary transfers: The regular case," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1373-1395, July.
  14. Goltsman, Maria & Hörner, Johannes & Pavlov, Gregory & Squintani, Francesco, 2009. "Mediation, arbitration and negotiation," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1397-1420, July.
  15. Austen-Smith, David, 1994. "Strategic Transmission of Costly Information," Econometrica, Econometric Society, vol. 62(4), pages 955-63, July.
  16. Vijay Krishna & John Morgan, 2001. "A Model Of Expertise," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 747-775, May.
  17. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 367-390, June.
  18. Dessein, Wouter, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 811-38, October.
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