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Information Aggregation and Communication in Organizations

  • Philippe Jehiel

    (C.E.R.A.S.-E.N.P.C, 28 rue des Saints-Pères, 75007 Paris, France and University College London)

Operating units must communicate their private information regarding decisions to be taken in organizations. This paper characterizes the optimal communication structures assuming that (i) a decision maker is fired whenever he makes a decision that proves wrong ex post relative to the status quo; and (ii) direct communication in a group of kunits may result in the loss of messages with a probability that solely depends on the group size. Several levels of partitioning with direct communication taking place in each group are required. It is shown that there exists a group size that allows communication technology to be exploited optimally: The optimal communication structure is such that it is essentially composed of groups of this size only at every level of partitioning.

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Article provided by INFORMS in its journal Management Science.

Volume (Year): 45 (1999)
Issue (Month): 5 (May)
Pages: 659-669

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Handle: RePEc:inm:ormnsc:v:45:y:1999:i:5:p:659-669
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