IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v145y2010i2p721-751.html
   My bibliography  Save this article

Informational control and organizational design

Author

Listed:
  • Ivanov, Maxim

Abstract

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.

Suggested Citation

  • Ivanov, Maxim, 2010. "Informational control and organizational design," Journal of Economic Theory, Elsevier, vol. 145(2), pages 721-751, March.
  • Handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:721-751
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022-0531(09)00144-6
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. Austen-Smith, David, 1994. "Strategic Transmission of Costly Information," Econometrica, Econometric Society, vol. 62(4), pages 955-963, July.
    3. Vijay Krishna & John Morgan, 2008. "Contracting for information under imperfect commitment," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 905-925.
    4. Ricardo Alonso & Niko Matouschek, 2008. "Optimal Delegation," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 259-293.
    5. Bergemann, Dirk & Pesendorfer, Martin, 2007. "Information structures in optimal auctions," Journal of Economic Theory, Elsevier, vol. 137(1), pages 580-609, November.
    6. Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
    7. Blume, Andreas & Board, Oliver J. & Kawamura, Kohei, 2007. "Noisy talk," Theoretical Economics, Econometric Society, vol. 2(4), December.
    8. 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.
    9. Rogerson, William P, 1990. "Quality vs. Quantity in Military Procurement," American Economic Review, American Economic Association, vol. 80(1), pages 83-92, March.
    10. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 747-775.
    11. Saak, Alexander E., 2006. "The optimal private information in single unit monopoly," Economics Letters, Elsevier, vol. 91(2), pages 267-272, May.
    12. 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.
    13. 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 309-327, May.
    14. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-1098, July.
    15. repec:cup:apsrev:v:95:y:2001:i:02:p:435-452_00 is not listed on IDEAS
    16. 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.
    17. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    18. Marco Ottaviani & Francesco Squintani, 2006. "Naive audience and communication bias," International Journal of Game Theory, Springer;Game Theory Society, vol. 35(1), pages 129-150, December.
    19. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Igor Letina & Shuo Liu & Nick Netzer, 2017. "Delegating performance evaluation," ECON - Working Papers 266, Department of Economics - University of Zurich, revised Mar 2018.
    2. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
    3. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    4. Otto H. Swank & Bauke Visser, 2015. "Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 109-149, November.
    5. Maria Goltsman, 2011. "Optimal information transmission in a holdup problem," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 495-526, September.
    6. Eric Schmidbauer & Dmitry Lubensky, 2016. "Equilibrium Informativeness in Veto-Based Delegation," Working Papers 2016-03, University of Central Florida, Department of Economics.
    7. Kolotilin, Anton & Li, Hao & Li, Wei, 2013. "Optimal limited authority for principal," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2344-2382.
    8. Maxim Ivanov, 2016. "Dynamic learning and strategic communication," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(3), pages 627-653, August.
    9. Alonso, Ricardo & Câmara, Odilon, 2014. "Persuading skeptics and reaffirming believers," LSE Research Online Documents on Economics 58680, London School of Economics and Political Science, LSE Library.
    10. Rossella Argenziano & Sergei Severinov & Francesco Squintani, 2016. "Strategic Information Acquisition and Transmission," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 119-155, August.
    11. repec:eee:gamebe:v:106:y:2017:i:c:p:153-160 is not listed on IDEAS
    12. Pei, Harry Di, 2015. "Communication with endogenous information acquisition," Journal of Economic Theory, Elsevier, vol. 160(C), pages 132-149.
    13. Kolotilin, Anton, 2015. "Experimental design to persuade," Games and Economic Behavior, Elsevier, vol. 90(C), pages 215-226.
    14. Alonso, Ricardo & Câmara, Odilon, 2016. "Bayesian persuasion with heterogeneous priors," Journal of Economic Theory, Elsevier, vol. 165(C), pages 672-706.
    15. Deimen, Inga & Szalay, Dezsö, 2014. "Smooth, strategic communication," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100333, Verein für Socialpolitik / German Economic Association.
    16. Frug, Alexander, 2016. "A note on optimal cheap talk equilibria in a discrete state space," Games and Economic Behavior, Elsevier, vol. 99(C), pages 180-185.
    17. Hedlund, Jonas, 2017. "Bayesian persuasion by a privately informed sender," Journal of Economic Theory, Elsevier, vol. 167(C), pages 229-268.
    18. Krähmer, Daniel & Kováč, Eugen, 2016. "Optimal sequential delegation," Journal of Economic Theory, Elsevier, vol. 163(C), pages 849-888.
    19. Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro, 2013. "Hierarchical cheap talk," Theoretical Economics, Econometric Society, vol. 8(1), January.
    20. Deimen, Inga & Szalay, Dezso, 2015. "Information, authority, and smooth communication in organizations," CEPR Discussion Papers 10969, C.E.P.R. Discussion Papers.
    21. Ivanov Maxim, 2015. "Dynamic Information Revelation in Cheap Talk," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 251-275, July.
    22. Vincent Anesi & Daniel J. Seidmann, 2009. "Optimal Delegation with a Finite Number of States," Discussion Papers 2009-20, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    23. Hedlund, Jonas, 2014. "Bayesian signaling," Working Papers 0577, University of Heidelberg, Department of Economics.
    24. Anton Kolotilin, 2013. "Optimal Information Disclosure: Quantity vs. Quality," Discussion Papers 2013-19, School of Economics, The University of New South Wales.
    25. Ricardo Alonso & Odilon Câmara, 2016. "Persuading Voters," American Economic Review, American Economic Association, vol. 106(11), pages 3590-3605, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:721-751. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.